Your construction contract

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Our agreement with you.

Essentially we want to avoid any risk of falling out. Many clients are unaware of the Construction Act and its amendments and think that they have to have a signed contract. This page explains what these clients do not yet know.

Firstly, please consider the following.
You would be foolish paying a builder in advance. If a builder isn't paid in advance he is effectively funding his client's work and materials. Surely, this is completely unfair.
A written agreement would normally compel a builder to continue even if he is still waiting for a payment. Clearly, not paying on time is a cheap way to get the builder to finance even more of the project.
A written agreement is subject to the Construction Act. If a builder did not use the proper materials or do the work properly the client can only get redress from adjudication afterwards.
If your project is being built under a written agreement and you are paying in arrears. Are you going to cheat the builder more than he cheats you?
Do you expect to want to live in this house?

Our approach is to prevent either side either feeling tempted to cheat or fretting that the other side would be tempted to cheat.

We come to an agreement with you by exchanging emails that, typically, contain an agreed scope of works and a payment plan with weekly payments each week in advance.

We came to a very similar agreement last year when we built the basement in Esher, and that resulted in a glowing testimonial.

We agreed in writing to do the work as he expected and he agreed in writing to pay us in advance each week a fair sum to cover the work we were about to do and the materials we were about to buy.

We agreed that if he did not like what we were doing or we weren't paid on time then we both walked away.

Secondly, we must explain adjudication, which is the dispute resolution arrangement forced upon both parties by the Act.


Architects would tell clients to enter into a binding contract (JCT) so that they could take their contractor to binding adjudication if the finished job wasn't quite right.

This might be considered "best advice"* but I don't think it is useful.
It might be best advice in that the architect protects himself from a negligence claim, but it ignores the certain failure of the arrangement.

Many years ago, main contractors - and clients as well, realised that if they dreamt up hundreds of bogus complaints and claims against their sub-contractors, that their sub-contractors could not take them to court (because of the Construction Act) or to Adjudication because of the prohibitive cost.

Because costs are not awarded, the sub-contactors soon learned that they could easily spend more on lawyers than they won in awards. So they walk away unpaid.

Main contractors and clients realised that they didn't have to formally make up all these excuses. They could refuse to pay the sub-contractor and simply threaten him with all these excuses if he took them to Adjudication.

If you consider this last statement carefully, then read a pop out page about Retentions, here, the bit where one company owes more than it is owed, it is easy to imagine that contractors, and clients as well, routinely don't pay in full.

Some cheating, thieving and greed might be concealed in accounts as Retentions. But it won't be saved away in a client account. It will be spent. Like the report says, SMEs can see all their profit retained and make nothing.

But why should the retention equal the profit? In our experience, the retention, or whatever it might be called, is more than the profit. Too often we lost money on fixed price contracts after being paid substantially less than we deserved. Particularly by clients who were lawyers, accountants, property developers or experienced in business.

This has been going on for so long that sub-contractors all have to become clever and ruthless, else they could not survive.

Ironically, it is perhaps in the best interest of the main contractor that the sub-contractor cheats so that he can start the process of holding money back from a more confident position. But he wouldn't tell a client what he had found so the client held money back from him.

THIS ALL APPLIES TO YOU AS WELL. Unless you live in the property throughout the works you cannot go to court. Neither can you be taken to court. So you don't have to pay for your work. If you are threatened with legal action, you simply get a solicitor to write a letter threatening a massive counter claim.

Now that you know this. And now that you know that any established sub-contractor knows this. What price will you settle on in a JCT contract? The fair price?

That is the only price you won't usually agree on.

It would seem that the one who should pay
can tie up the one who wants paying for ever.

construction adjudication

First in adjudication then in court.

Our work turned out very well every time we were paid in stages always in advance. When we were paid just the fair price in full just before we finished.

It takes a great deal of faith on the part of the client - especially when all his friends will advise against it so he faces their tongue lashings throughout.

But otherwise we would have to inflate our price trying to guess how much is going to be withheld. And we would worry throughout instead of concentrating on our work.

For the first few years I regularly got stitched up. I have often heard about other companies that took deposits and ran. I never did.

Agreeing a fixed price and coming to a binding agreement is fraught with difficulty because, by law, the price is not fixed and the agreement can be ignored.

This is well known by experienced clients and contractors alike. Yet many architects seem to be completely unaware, such as Kevin McCloud who often talks about proper written contracts.

And it works both ways.

You cannot make your sub-contractor, with an adversarial agreement, do the work you have paid him for or use the proper materials or do the work properly.

Yet if you sack a sub-contractor prematurely he will take you to court for breach of contract, claim damages and win.

That's why nearly every basement built in the UK leaks and why many people like you phone me up to ask me to complete someone else's work - and of course by now the client is very fearful and short of money, and I won't take on responsibility for works already done badly by others who always knew they were going to do a runner.
I have been saying this for many years.

Since the Grenfell Tower disaster I realise that the reason any fire stopping over the insulation did not work could have been because the workmanship was not good enough.

What if the main contractor had inspected it and decided it was not good enough?

He may have been able to not pay the sub-contractor but otherwise he might have been powerless to get the work put right .....

..... because of the adversarial contract and the cost of adjudication that could have cost more than his profit for the whole project.

I won't cheat you, I don't have it in me to do so.

Neither will I do your work beyond any moment I think you are cheating me.

That's why I will only work for you one of two ways.
  1. We can build your basement for a fixed, agreed cost only if all our payments are in advance. You have to trust us to complete the work. However there can be many stage payments, all relatively small, so at any time you have very little money at risk.

  2. I work for you on a Value Engineering basis, working together to find savings and you pay cost. Nothing more. Unfortunately you don't know in advance how much that will be but it will be very fair. You could build in incentive payments (as long as they weren't a sneaky way to not pay).

    This puts the risk firmly in your court. But if you had a good soil investigation, a robust structural design and an expert, me, on your site throughout supervising everything you shouldn't have any risk left.
Value Engineering is very commonly used by small developers because they get the work done properly, they get best value and the best people will work for them time and time again.

It is very popular with good tradesmen because they can take pride in their work, not constantly be told to cut corners. So they work in a way that will get them more work in future.

It is very popular with me as well. Good pay for a good job is ideal. The kind of work I want.

It is the way that the sub-contractor has always paid his team. Directly for the work done. It allows the sub-contractor to sack anyone not pulling their weight. If you pay me and the men and you pay for all your materials you get a say about what is used and who uses it.

But I won't appreciate it if you use your power as paymaster as pressure to make us cut corners. To cheat like a sub-contractor.

If you employ me on this basis it is called Value Engineering. Same team. Same goals. The outcome you want for the same price or less.

I promise to have your best interests at heart. If I start to let you down you get rid of me.

The article below suggests that £55,000 paid up front to lawyers would be enough to win at adjudication, but my belief is it takes 3 or 4 times that much, over £200,000, to make sure you are prepared to win against every tiny excuse that the contractor could dream up (or his specialist lawyer already has prepared). You get no prior warning with Adjudication. You fix a date and every issue is aired for the first time at the hearing. That's why it costs so much to be fully prepared - for anything and everything, true or not.

And the contractor has to spend over £200,000 as well to make sure he can win against every little claim that you can dream up.

And unless you both gambled on wording in your contract to pay the other side's costs you won't get any of your legal costs back.

So the harsh reality is that if you enter into an adversarial JCT-type contract your contractor cannot make you pay any more than you can make him do the work properly or use the right materials.

The answer is not to enter into an adversarial contract but to team up, either on a Value Engineering basis or an agreement to pay small installments just in advance with the option for the client to sack his contractor if he is not happy and for the contractor to walk away if he is not paid. In fact, this is so simple there might be no need for it to be in writing. Either would allow you to only pay for the correct materials and to sack anyone not building to the standard you require. With a JCT contract you cannot do either.

waterproof basement self build adjudication

waterproof basement self build late payments

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waterproof basement construction   You Must Have a Soil Report Before Design Starts   Please Ask Your Architect To Read This Page   Please Ask Your Structural Engineer To Read This Page   construction contract

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