Your construction contract
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.
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.
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.
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.
We have a number of other pages with information.