Should I insist on a Formal Building Contract for a small project?

I often get asked what size does a project need to be before the use of a formal contract. And my advice particularly, for working with private clients, is basically any size needs a formal contract if you want to avoid the headaches. Likewise when friends have having building work done I give them exactly the same advice that they should not employ a builder without any standard form of contract in place.

I am amazed at the number of “professional” contractors and builders who undertake works of many tens of thousands of pounds with private clients and don’t insist on a signed contract. At the end of the day they are putting their business at risk. It should go without saying that private clients, do not know or understand the construction industry and can act in a non-professional manner through ignorance, and quite often this is by withholding payment. As a industry professional i.e. a builder or contractor,  you should lead the contractual arrangements and ensure that the paperwork is correct to cover both parties interests.

The last thing a contractor or a client needs when they have a problem with the project is first to have to determine the contractual arrangements and therefore what have to take to remedy the problem. Just establishing what terms and conditions, if any, apply can be more than the cost of the dispute in the first instance and is therefore not helpful to either party. To make matters worse the adjudicator, magistrate etc is likely to take the opinion that they industry expert is the one who should have ensured that we contractual arrangements were in order and that therefore the cost of both parties in determining same on likely to be borne by the contractor. Again making it very difficult to deal with the most popular type of dispute in this area which is payment or more accurately non-payment.

In the UK any building work that is completed without formal contract conditions but it is evidenced in writing in some manner, (and this can be e-mail faxes with a simple offer and acceptance letter i.e. please complete the work as your quotation) will then come under the Housing Grants, Construction and Regeneration Act 1996 which states the minimum conditions for the contract in a document called The Scheme. This was a great move by the government and one of the provisions in “The Scheme” is the right to go to adjudication in the case of a dispute. So all is not lost providing the agreement is in writing in some form.

Better still the Joint Contracts Tribunal or JCT the short produce a wide range of contracts for all sizes of projects for a relatively small sum of money of £12.95 plus VAT, the JCT Minor Works Contract is likely to be the one required. All you have to do is fill in the blanks. These contracts, while some might consider them not perfect, are drawn up by the industry professionals with the intention of being impartial. The advantage of using a contract is that should a dispute occur then at the least there is a starting point as to who should be doing what and what each parties rights are. The contract incorporates all the requirements of The Scheme including adjudication. Do not be tempted to think you know better and start altering the contract through, just fill in the blanks!

Adjudication is designed to be a cheap and quick fix and anyone can apply for the appointment of adjudicator and run the process themselves. However this may not be advisable because although these are relatively informal procedures, the adjudicator is bound to apply the law and in this case contract law and the last thing you want to do is lose your case on a technicality which could have been avoided with professional assistance.

So to conclude if you are a individual wishing to carry out a small extension or alteration to your house or office or if you are a small contractor undertaking such work then always insist on a signed contract or at the very least do not allow the work to commence until both parties have signed bits of paper agreeing for the work to be carried out. And remember it does not matter how friendly everyone is at the beginning things can do and unfortunately frequently, do go wrong, so the professional buy two copies of the JCT Minor Works Contract, both parties sign and both parties keep a copy. Don’t be embarrassed or intimidated into thinking that you are in some way not trusting the other party by insisting on a contract. Its well worth it.