Standard form construction contracts: Which to choose and whether to amend them

You are not an experienced developer but you need building or other construction services and a “standard industry form” building contract is proposed. Is it the right one, and is it suitable to enter into it unamended?

Choice of construction contract

There are several publishers of sets of construction contracts and related documents (such as professional appointments) but the most commonly used contracts in the private sector in this country are published by the Joint Contracts Tribunal (JCT). JCT contracts have been used and developed over many decades, covering anything from work on a home to major projects.

Another well-known set is the New Engineering Contract (NEC) suite, first created in 1993 and published by the Institution of Civil Engineers. This is probably the most used set in the public sector but is also used by the private sector. It is designed to be more collaborative, requiring the employer, contractor, project manager and supervisor to act in a spirit of “mutual trust and cooperation”. As such, NEC contracts are generally shorter and seek to be less ‘legalistic’.  If you choose an NEC contract, the project manager’s role is fundamental. They need to have substantial experience and expertise in managing them.

There are pros and cons of each of the different standard forms, and we would recommend getting advice as to the most appropriate form to use for your particular scheme from experienced professionals, such as a project manager, architect or construction lawyer.

Amending standard construction contracts

If the construction contract is on a “standard industry form” contract, such as JCT or NEC , why might it need amending? Much will depend on the circumstances (such as the sums involved and the complexity of the scheme) but the main reason is to ensure it reflects the risks that you want the contractor to take.

JCT

If using, for example, the JCT Design and Build or the JCT Intermediate Contract (2016 editions), you might want to consider amendments to deal with some of the following:

• If the contract is design and build, and you want the contractor to take over responsibility for any design work that has already been carried out on your behalf by a third party.
• If you want the contractor to comply with relevant provisions of planning, highways or other statutory agreements affecting the site, or an agreement for lease or funding agreement.
• If you want the contractor to have to comply with any of your policies, such as environmental or social, modern slavery or bribery.
• To ensure your use of the contractor’s copyright materials is not prevented by a dispute over payments.
• To ensure that the contractor does not get an extension of time or additional money where the issue was caused by the contractor’s breach.
• To oblige the contractor not to cause a legal nuisance to neighbours or the public and not to trespass on neighbours’ land (for example, by overhanging cranes).
• To ensure appropriate joint insurance arrangements, for example, where a funder or purchaser want to be joint insured, not just you and the contractor.
• To entitle you, as the employer, to assign the benefit of the building contract (e.g. to a purchaser or funder) without the need for consent from the contractor.
• To require collateral warranties in different, perhaps more favourable, forms than, for example, the JCT collateral warranty forms and to expand the list of persons for whom collateral warranties can be required. Collateral warranties are warranties from the builder or its professionals or sub-contractors in favour of the employer and/or any funder, tenant or purchaser and sometimes others, such as management companies, that the warrantor has complied and will continue to comply with the construction contract or professional appointment it entered into. They often contain other provisions too, including a copyright licence and step-in rights.
• To entitle you to withhold sums from the contractor where collateral warranties are not provided on time.

NEC

The NEC would prefer their contracts not to be significantly amended. They’re intended to promote active, cooperative management practices, not to deal in detail with every circumstance that might arise.  Nevertheless, they often are amended. It is worth considering whether, at the least, some clarifications or additions are needed so as to avoid disputes on matters you consider to have been clearly agreed up-front. Some of the points listed above may be relevant. You might also want to consider, for example:

• Whether there should be a clause giving an order of priority of the documents comprising the NEC contract (e.g. the NEC Contract wording, any amendments to it, the Scope and the Contract Data), in case there turns out to be a conflict between any of them.
• Is it right that you should take all the risk (loss and expense as well as delay) of bad weather or adverse site conditions?
• Wording to strengthen the protections for you where you are to pay the contractor for materials stored off-site.
• Whether to improve your position under the copyright licence wording.

Further guidance and support

Choosing the right contract for your scheme requires careful thought and the right professional advice. Once a form (or suite of forms) has been selected, in many cases it will be in your interest, as the employer (and in the interests of any funder) to make some amendments and add some additional clauses to the standard form, both to give greater protection and to reflect agreed terms that are specific to the actual development.

Our team of construction lawyers can help you structure your contractual arrangements to reflect your aims and the requirements of your project, using either bespoke or standard forms, and taking care to reflect your risk profile.

This content is correct at time of publication