2. What this unit is about
• Standard forms of Building Contract, as
created by the JCT
• Construction (Design and Management)
Regulations (CDM Regs)
3. Why do we need building contracts?
• Building works are expensive
– There is a lot of money at stake
• Building works are complex
– There are many different parties involved
• Building works are unpredictable
– Completion may be delayed
– Builders may got bankrupt
• Buildings are needed at specific times
– An incomplete factory cannot make
anything
4. The contract basics
• Building contracts are the same as all
other contracts
– party A promises to do x if party B
promises to do y
• Most commonly one party will promise
to pay the other party for providing a
service or product
– A building owner promises to pay a builder
for providing a new building (This is the
basis of any building contract)
5. What makes building contracts special?
• When you buy an existing product you can
satisfy yourself that it is worth the asking price
before you agree to pay.
• A new building does not exist when the
contract is signed…
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What will it be like?
How competent is the builder?
What if there are problems or delays?
What happens if the client doesn’t pay or goes
bankrupt before paying?
• You need a good contract to cover these
6. Types of contract
• A verbal agreement is a binding
contract, but fraught with perils
– What was agreed?
– Who agreed it?
– When was it agreed?
• A letter of appointment is a binding
contract, but it still will not describe the
building on offer in detail
• Best use a Standard Form of Building
Contract from the JCT
7. Joint Contracts Tribunal
• JCT established in 1931 to draw up agreed
forms of contract for the construction
industry
• Members
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Association of Consulting Engineers
British Property Federation
Construction Confederation
Local Government Association
National Specialist Contractors Council
Royal Institute of British Architects
The Royal Institution of Chartered Surveyors
Scottish Building Contract Committee Ltd
• Guidance on choosing a contract available at
– www.jctltd.co.uk
8. First principles: the parties to the contract
• The contract exists between two parties
– The employer (the person who will pay
money in return for the completion of the
building, basically the building owner)
– The contractor (the person who will provide
the completed building for the agreed
payment. The contractor will not
necessarily construct the building, but is
responsible for getting it built)
• No one else is party to the main
contract.
9. First principles: the fundamental purpose of the contract
• Risk management
– The contractor runs a risk that he will not
be paid
– The employer runs the risk that the building
may be unsatisfactory in some way
• The contract terms establish the
apportionment of these risks between
the two parties
10. Types of JCT contract
• There are a great number of JCT forms of
contract, suitable for different sizes of
contract
• The full range, with explanations of each
type, can be seen on the JCT web site. Look
at them here:
http://www.jctltd.co.uk/category/contract-families
• The full contracts aim to reduce risk, but are
complex and push up costs
• The simpler contracts keep costs down for
small works, but will not cover all
eventualities.
11. JCT 2011
1.
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3.
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12.
Standard Building Contract
Intermediate Building Contract
Minor Works Building Contract
Major Project Construction Contract
Design and Build Contract
Management Building Contract
Construction Management Contract
Constructing excellence Contract
Measured Term Contract
Prime Cost Building Contract
Repair and Maintenance Contract
Home Owner Contracts
12. Standard Building Contract (SBC)
• This is the base form of contract used
for large, conventional building projects
where a contract supervisor is
employed
• It comes in three main forms,
approximate quantities, full quantities
and no quantities, depending on the
detail available.
13. Intermediate and Minor Works contracts
• These two categories cover projects in
descending scale.
• Intermediate means full range of
building trades, but simple servicing
installation
• Minor works, means fairly simple
construction project, possibly not using
full range of trades.
14. Management Building Contract
• Used for large, expensive projects
• The Contractor is appointed as a member of
the professional design team
• He/She does not build anything but subcontracts all parts of the project
• The benefit is that an experienced builder can
contribute to the development of the design
from the outset, rather than coming in after all
design is completed
• Not generally suitable for small projects
15. Homeowner Contracts
• The HO (Home owner) contracts are for use
in small scale domestic construction
• HO/B: Building Contract for Home
Owner/Occupier (where the client deals
directly with the builder)
• HO/C: Building Contract for Home
Owner/Occupier (who has appointed a
consultant)
• The employer is the owner-occupier of the
house
• The main purpose of these contracts is to
satisfy Unfair Terms in Consumer Contracts
Regulations 1999 .
16. Contract documents
• The formal contract is only one of the so
called “contract documents”
• The others may comprise:
– Contract drawings
– Bills of Quantities
– Specifications
– Schedules of Works
• These are all agreed and kept safe and
unchanged for future reference.
17. When is the contract used
• If all goes according to plan, the signed
contract documents will remain locked in a
safe and may never consulted.
• If something goes wrong or changes (supplier
fails to deliver, heavy rain delays foundation
works, architect is arrested for
embezzlement…) a good contract should set
out exactly who is responsible and what
agreed course of action is to be followed.
• The prime difference between the forms of
contract is the fineness of the detail of the
potential disasters which are addressed.
19. The basics
• Aims to improve Health and Safety on
the building site
• Overseen by the Health and Safety
Executive (HSE)
• Basic information at:
http://www.hse.gov.uk/construction/cdm.htm
• Full Regs at:
http://www.legislation.gov.uk/uksi/2007/320/contents/made
• Projects can be notifiable or non-notifiable
• Domestic clients (homeowners) are
exempted from a role under CDM regulations
20. Building project classes
• Non-notifiable projects
– Project lasts less than 30 days or less than
500 “person days” e.g. if 60 people work
on site for more than 10 days, it is
notifiable
• Notifiable projects
– Longer projects than the above, but not
domestic projects
– HSE must be informed of the project using
F10 form or equivalent. This sets out the
basic information about the planned project
21. Duty holders
CDM regs define duty holders and duties:
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Clients (must appoint 2 and 4 if project is notifiable)
CDM coordinators (only for notifiable projects)
Designers
Principal contractors (only for notifiable projects)
Contractors
Workers
22. Duties
• Set out in detail and summary by HSE
http://www.hse.gov.uk/construction/cdm/summary.htm
• Most duties are self evident, good practice
• The designer must also record necessary
safety information for future users, up to
and including future demolition of the
building
• HSE can enforce CDM compliance:
The principles of the enforcement policy are: Proportionality,
Targeting, Consistency, Transparency and Accountability. HSE
will focus on serious problems and not trivialities. (HSE 2013)
