Top 100 Tips for Business – #6 Construction Contracts01-05-2017
Building solid foundations – the role of contracts in construction
You don’t have to look far to take on board the evidence of Hull, City of Culture 2017’s impact on our town.
Cranes and half-built structures push through the skyline in all directions and the face of Hull is changing to accommodate the vast array of buildings – permanent and temporary – needed to host the exciting events marking our city’s special year.
Not to mention the significant numbers of employees, tourists and visitors each playing their part in this exciting transformation process. So much so that there are doubts whether the pace of building can actually keep up with demand.
Major companies have spent millions on a major vote of confidence in our future, in the form of bricks and mortar. Reportedly Reckitt Benckiser has invested £150million in a state-of-the-art research and development centre in the city; Siemens has ploughed over £300million into Europe’s largest wind turbine manufacturing plant on Alexandra Dock, creating over 1,000 new jobs; a £200m project will generate energy from household waste and the City Council has invested close to £100m in new housing.
Construction, in most contexts, acts as a powerful catalyst for positive change. Large sites create affluence among the smaller businesses within their supply chain, new houses attract refreshed interest and push up the value of existing stock. This is exactly what is happening in Hull, with the result that the numbers above mark just the tip of a very big iceberg. A recent article in the Hull Daily Mail quoted our James Legal – The Business 2017 campaign partner Darren Peacock, of Peacock Finance, saying that Hull – which used to languish at the bottom of every meaningful statistic – is now top of the list of hot UK property investment spots among so-called ‘property training clubs’.
A double-edged sword
All of this is great news for those who have been tasked with these build projects. However, if you work in the construction industry, you will know better than anybody that such things don’t always go according to plan. With such a pace of re-development also comes pressure and the potential for problems.
Faced with deadlines, penalty clauses, difficulties with suppliers and goods, and many other commercial issues, there often just isn’t enough time to complete important tasks like documenting design and materials variations, or deal properly with the costs consequences of those changes.
When the wolf is at the door, the paperwork often goes out of the window, and this can create the potential for long and costly disputes if you’re not careful.
Know your RIBA from your JCT?
At times like these it is often comforting to have a contract to fall back on, but what kind of contract do you have? Is it purely oral in nature (I hope not, as that’s almost too risky to bear thinking about) or do you have a written contract?
If written, is your contract bespoke (based, for example, on your project-specific terms and conditions), or is it one of the many standard forms of contract available, backed by NEC, JCT, or RIBA? If the latter, do you know your way around these standard contracts and the crucial differences between them? For example, and very importantly, their scope of liability can differ considerably. The indemnity provisions in the standard NEC contract cover everything inside and outside the contract, while those in the JCT contract deal with public liability issues and existing structures and their contents.
In a nutshell
NEC (most recently NEC3) is a suite of contracts which promotes sound project management principles and practices, and covers major and minor works including services and supply, and the purchase of supplies and goods.
JCT stands for the Joint Contracts Tribunal, which has produced standard construction contracts, guidance notes and other standard forms of documentation to the construction industry since 1931. It is designed for large or complex projects.
The RIBA Domestic Building Contract covers all types of non-commercial work, such as that carried out on the customer’s own home including renovations, extensions, maintenance and new buildings. This type of agreement is overseen by an architect or contract administrator who the customer can choose to appoint using the RIBA Domestic Project Agreement.
In any case, are you confident that the standard provisions of these contracts are enough, or do you actually need to make bespoke additions or amendments to them to cover you for all the possible eventualities that could arise from your project?
How do you know if the ‘standard’ options in these (supposedly) standard contracts have been amended in order to favour the ‘other guy’?
- An employer needing to define and control your relationship with your workers?
- A project manager wanting to ensure payment for completed construction work is made on time?
- A subcontractor struggling to get paid at all?
- Running a construction project you feel you are losing control of (perhaps you need an extension of the time limit for completing it)?
If any or all of these apply to you, at James Legal we can use our specialist knowledge to guide you through the legal aspects of your construction project which, if ignored or handled incorrectly, could result in costly disputes.
To arrange a complimentary initial conversation about your needs, email me at firstname.lastname@example.org or call me on 01482 974 484/07885 462 255.