Frequently Asked Questions

Do I need a Building Contract?

Yes to control the time and money risk to ensure the project is brought in on budget by the estimated completion date with quality design, materials and workmanship. Following the implementation of the amended Housing Grants Construction and Regeneration Act 1996 on 01 October 2011 (amended by Part 8 of The Local Democracy, Economic Development and Construction Act 2009), contracts formed wholly or partly in writing or oral will fall under the scope of the Act.  Time and money can often be wasted in determining what was said and agreed between the parties and it is therefore best to have it all reduced into a clear written building contract so that arguments cannot arise about what was agreed.  Any negotiations leading up to exchange of the Building Contract should be clearly marked as "subject to contract". 

How will the amended Construction Act affect me? 

The main changes relate to payment, adjudication and suspension.  If you enter into a construction contract after 01 October 2011 and you do not use a contract compliant with the amended Act, the non-compliant parts of the contract will fall under the ambit of The Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011 meaning the risk will start to get out of control.  You may also be missing out on taking advantage of amendments that are more beneficial to you.  

Will a Letter of Intent protect my position ahead of a Building Contract being put in place?

Yes but only if carefully drafted and detailing what still needs to be agreed, timescale, scope of works, and a maximum commitment on expenditure plus other key clauses. Often these factors are overtaken by events and clients forget to update the Letter of Intent which then becomes less relevant e.g. when the maximum commitment is exceeded. Letters of Intent are inherently uncertain and require careful drafting. They should always be regarded as a short-term temporary measure before entering into the formal Building Contract and not as a substitute thereof.

What is my best remedy for non-payment?

If you have a written contract, read it carefully and ensure you have an entitlement to suspend performance of the works in whole or part. If you have, ensure you have followed the payment regime yourself and then give appropriate notice to suspend the works in whole or part.  Suspension in part is very useful as e.g. you may be able to defer delivery of a key component that makes the whole system work.  It is best to seek legal advice on this because a failed suspension out with the contract can be regarded as a major breach of contract i.e. abandoning the works and a claim may be made against you for leaving site and not completing the work on time or at all.

What if my contractor goes bust?

Most contracts contain specific termination clauses in this event and the contract must be carefully considered (as must the consequences of termination) before notice is served.  In the event of insolvency, a contract must be terminated before another contractor can be given possession of the Site in order to finish the works. You need to check very carefully that the act of insolvency "marries up" to the right to terminate.  Again, this is a major step and so it is best to take legal advice. 

Can an Employer sue an insolvent contractor?

Yes but leave of Court is required and there isn't much point in incurring the legal and other costs if you are an unsecured creditor as only pennies in the pound are usually recoverable.

Can an insolvent Contractor sue the Employer and does the Employer have to pay any money?

The Administrator/Liquidator can sue for sums due and generally those sums must be paid subject to any sums deductible by way of setoff or counterclaim.