Construction contract

[edit] Introduction

This article refers to the contract for the main contractor to construct the works (and on some contracts also to design, operate and finance the project). For agreements for the appointment of consultants, independent client advisers, site inspectorate, project managers, client representatives, etc., see the article on Appointing consultants.

[edit] What is a construction contract?

The classic 19th-century definition of a contract is 'a promise or set of promises which the law will enforce' (ref. Pollock, Principles of Contract 13th edition). That is, there is reciprocity of undertaking passing between the promisor and the promisee. In a contract, the rights and obligations are created by the acts of agreement between the parties to the contractual arrangement.

Construction contracts are agreements between a client or employer and a contractor or other supplier to carry out works in relation to a construction project.

[edit] How is a construction contract procured?

The National Construction Contracts and Law Report 2018, published by NBS, suggested the following mix of procurement routes in the construction industry:

• Traditional procurement 46%
• Design and build 41%
• Partnering / alliancing 3%
• Construction management 3%
• Contractor approved without any tender process 2%
• Measured term 1%
• PFI / PPP 1%
• Cost plus 1%
• Management contracting 1%

For more information see: What is the most common procurement route?

The 'traditional' procurement route is a single-stage process, where the design is developed in detail by a consultant team working for the client and a contractor is then appointed under a lump-sum construction contract.

For more information see: Traditional contract.

[edit] What are the main types of construction contract?

In the procurement of construction, contracts are generally:

• Standard forms.
• Modified standard forms.
• Bespoke.

[edit] What are the main standard forms of construction contract in the UK?

English law does not require a particular form to contracts, therefore the terms and ultimately the risk allocation is the choice of the parties involved. Standard Form Contracts (SFC) aim to minimise the time and cost of negotiating contracts. Some of the the main standard forms of construction contract in the UK are listed below.

[edit] JCT (The Joint Contracts Tribunal)

• Standard Building Contract
• Intermediate Building Contract
• Minor Works Building Contract
• Major Project Construction Contract
• Design and Build Contract
• Management Building Contract
• Construction Management Contract
• JCT-CE Contract
• Measured Term Contract
• Prime Cost Building Contract
• Repair & Maintenance Contract

[edit] ACA (Association of Consultant Architects)

• ACA Form of Building Agreement
• ACA Form of Subcontract
• PPC2000 (Amended 2013)
• TPC2005 (Amended 2008)
• SPC2000 (Amended 2008)
• STPC2005 Issued 2010
• SPC2000 Short Form [Issued 2010]
• PPC International – For Project Partnering Overseas
• SPC International
• PPC (S)2000 – Scottish Supplement to Ppc2000
• PPC2000 – [Amended 2003]
• PPC2000 (Amended 2008)
• FAC-1 Framework Alliance Contract
• TAC-1 Framework Alliance Contract
• FAC-1 – Spanish – Contrato Marco De Alianza

[edit] Chartered Institute of Building

• CPC 2013: CIOB Contract for use with Complex Projects.
• CIOB Facilities Management Contract.

[edit] FIDIC (Fédération Internationale des Ingénieurs-Conseils)

• Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer: The Construction Contract
• Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer (MDB Harmonised Edition) - for bank financed projects only: The MDB Construction Contract
• Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant and for Building and Engineering Works Designed by the Contractor: The Plant and Design-Build Contract
• Conditions of Contract for EPC/Turnkey Projects: The EPC/Turnkey Contract
• Short Form of Contract: The Short Form
• Dredgers Contract (based on the Short Form of Contract): Dredgers Contract

[edit] NEC (The New Engineering Contract): Engineering and Construction Contract)

• NEC4: Alliance Contract
• NEC4: Design Build and Operate Contract
• NEC4: Dispute Resolution Service Contract
• NEC4: Engineering and Construction Contract
• NEC4: Engineering and Construction Short Contract
• NEC4: Engineering and Construction Short Subcontract
• NEC4: Facilities Management Contract
• NEC4: Facilities Management Short Contract
• NEC4: Facilities Management Short Subcontract
• NEC4: Facilities Management Subcontract
• NEC4: Framework Contract
• NEC4: Professional Service Contract
• NEC4: Professional Service Short Contract
• NEC4: Professional Service Subcontract
• NEC4: Supply Contract
• NEC4: Supply Short Contract
• NEC4: Term Service Contract
• NEC4: Term Service Short Contract
• NEC4: Term Service Subcontract

For more information, see NEC.

[edit] Other forms of contract

Other less commonly used forms of contract include:

• The GC Works suite of standard government conditions of contract are no longer being updated by the government who are now moving to the New Engineering Contracts. See GC Works for more information.
• IChemE (The Institution of Chemical Engineers) forms of contract.
• ICC Infrastructure Conditions of Contract. A relaunch of CoC (see below)
• The ICE Conditions of Contract (CoC) (previously maintained by the Institution of Civil Engineers) - now withdrawn in favour of NEC contracts. See ICE Conditions of Contract for more information.
• IMechE/IET (The Institution of Mechanical Engineers / The Institution of Engineering Technology) Model Forms of General Conditions of Contract for electrical works (MF/1-4).
• The Civil Engineering Contractors' Association (CECA) subcontracts for the ICC (above).

[edit] Contract conditions

Contract conditions set out the principal legal relationship between the parties to a construction project, determining the allocation of risk and consequently, price.

See: Contract conditions for more information.

[edit] Modified standard forms of contract

Some professionals believe that parties should not amend standard contracts as there is a complex interaction between many of the terms and modification can change the balance of risk and create legal uncertainty. The Latham Report recommended the use of standard contracts without amendments (Latham, 1994) and amendment was also criticised by Lloyd QC in Royal Brompton Hospital National Health Trust v Hammond and Others:

However, some argue that no standard contract could allow for all the varying specifics of every individual project. There are also situations where amendment is necessary; for example if certain clauses become obsolete or the industry shifts and requires the inclusion of new terms.

For more information see: Modifying clauses in standard forms of contract.

[edit] Bespoke contracts

24% of respondents to the National Construction Contracts and Law Survey 2012 indicated that they use purpose-written bespoke contracts. Not only is this considered inadvisable because of the risk that bespoke contracts may not adequately or fairly make provision for all circumstances, and that they are not supported by a history of case law, but it is also a poor reflection of how inflexible and ineffective the industry perceives many of the standard forms of contract to be.

For more information, see Bespoke construction contract.

[edit] Pre-construction services agreements

NB: The first stage appointment of a two-stage procurement process might be made using a separate pre-construction services agreement (PCA or PCSA), sometimes called early works agreements, rather than under the provisions of the main, second-stage contract.

For more information see: Pre-construction services agreements.

[edit] Sub contracts

As buildings become increasingly complicated, so it becomes less and less likely that any one contractor will have the required skills to carry out all of the works necessary to construct them, and it may not make good commercial sense to take on new employees for one project that would then have to be laid off for the next.

Increasingly therefore, contractors will use sub-contractors to carry out particular elements of the works. This has lead to the creation of a wide range of sub-contracts.

For more information see: Sub-contractor.

[edit] Housing Grants, Construction and Regeneration Act

The Housing Grants, Construction and Regeneration Act 1996 (HGRA - also known as the Construction Act) is intended to ensure that payments are made promptly throughout the supply chain and that disputes are resolved swiftly.

Provisions of the act include:

• The right to be paid in interim, periodic or stage payments.
• The right to be informed of the amount due, or any amounts to be withheld.
• The right to suspend performance for non-payment.
• The right to adjudication.
• Disallowing pay when paid clauses.

The Act applies to all contracts for 'construction operations' (including construction contracts and consultants' appointments). If contracts fail to comply with the act, then the Scheme for Construction Contracts applies.

For more information see: Housing Grants, Construction and Regeneration Act HGRA.

[edit] Related articles on Designing Buildings

• Addendum.
• Agreement.
• Bespoke construction contract.
• Concession Contracts Regulations.
• Construction contractor.
• Contract documents for construction.
• Contractual chain.
• Contractual obligation.
• Contractual right.
• Core clause.
• FIDIC.
• Forward contract.
• Housing Grants, Construction and Regeneration Act HGRA.
• Hybrid construction contract.
• Intermediate building contract
• JCT
• Job order contracting.
• Memorandum of understanding.
• Model Services Contract MSC.
• Modifying clauses in standard forms of construction contract.
• NEC.
• Onerous contract.
• PPC 2000.
• Reserved contract.
• Scheme for construction contracts
• Tender documentation for construction projects.
• Traditional contract for construction.
• What is an EPC contract?

[edit] External references

• The London Government Taskforce: A Guide to standard forms of construction contract, outlining key characteristics and components.
• The International Bar Association: Standard forms: contract conditions.
• PACE: Guide to the appointment of consultants and contractors P96.
• OGC: Partnering contract review.
• The Joint Contracts Tribunal.
• JCT: Deciding on the appropriate JCT contract. 2011
• nbs: National Construction Contracts and Law Survey 2012.
• Pollock, Principles of Contract (13th Edition).
• Winward Fearon on Collateral Warranties, David L Cornes and Richard Winward. 2002.
• Construction Contract Types Explained

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