Building Contracts &CDM regulations

What this unit is about

• Standard forms of Building Contract, as created by the JCT

• Construction (Design and Management) Regulations (CDM Regs)

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

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)

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…– 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

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

Joint Contracts Tribunal

• JCT established in 1931 to draw up agreed forms of contract for the construction industry

• Members– 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

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.

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

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.

JCT 2011

1. Standard Building Contract 2. Intermediate Building Contract 3. Minor Works Building Contract 4. Major Project Construction Contract5. Design and Build Contract 6. Management Building Contract 7. Construction Management Contract 8. Constructing excellence Contract 9. Measured Term Contract 10. Prime Cost Building Contract 11. Repair and Maintenance Contract12. Home Owner Contracts

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.

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.

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 sub-

contracts 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

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 .

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.

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.

CDM regs 2007: Health and safety on the building site

and after

Construction (Design and Management) Regulations

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

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

Duty holders

CDM regs define duty holders and duties:

1. Clients (must appoint 2 and 4 if project is notifiable)

2. CDM coordinators (only for notifiable projects)

3. Designers4. Principal contractors (only for notifiable projects)

5. Contractors6. Workers

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)