Drafting thorough, precise contracts is crucial for minimising the risk of disputes and for ensuring your construction project goes as smoothly as possible.
However, with various options available to you, deciding which contract you wish to prepare for your construction project can be tricky.
Here’s an overview of the different types of construction contract available to you.
JCT contracts
Joint Contracts Tribunal (JCT) contracts are standardised documents that lay out the roles, responsibilities, and obligations of all parties involved in a construction project.
They describe how risks are shared, how payments are made, and how any disputes or delays are handled.
These contracts are important for construction businesses because they spell out clear terms and conditions, so everyone knows what is expected of them.
They also help ensure that risks are properly allocated between different parties, which helps prevent disputes.
JCT contracts are widely used and respected in the construction sector.
Using a well-known standard like JCT means that construction businesses can be confident that their contracts meet relevant laws and industry standards.
There are different types of JCT contracts depending on the needs of your project, such as cost, timescale and complexity.
For example, the JCT Design and Build Contract is commonly used for projects where the contractor is responsible for both the design and construction of the works, while the JCT Minor Works Contract is designed for smaller, lower-value projects.
NEC contracts
The New Engineering Contract (NEC) provides contracts to ensure successful relationships between parties and the completion of projects in construction works.
The NEC makes contracts useable to workers who will be having direct involvement with projects. This insight allows good relationships between parties meaning they can work together efficiently to deliver.
NEC contracts can be made to be bespoke by solicitors ensuring an accurate and functional contract.
These contracts ensure all elements of a project fit together properly as projects often feature many parties who are dependent on each other.
The NEC provides contracts with three principles in mind:
- To stimulate good management of the relationship between the two parties to the contract and the work involved in the contract.
- To create contracts for a wide range of commercial situations, types of work, and locations.
- To be clear, simple, and use a language and structure which is easily understood.
NEC contracts are grouped into three categories:
- Works – Designed for the construction, design, refurbishment, and decommissioning of structures including houses, schools, and hospitals, to infrastructure for water, energy, transport, industry, and waste.
- Services – These are for purchasing specialised services such as engineering, architectural, project management, and consultancy works.
- Supply – These are for the supply of goods and services such as production of modular units, transformers, generators, rolling stock, and cranes. They can also be used for lower-risk items such as building materials and personal protective equipment.
NECs are unique for their straightforward approach to defining the responsibilities and obligations of all parties involved.
They are based on a collaborative approach to project management. The contracts are designed to encourage all parties involved in a project to work together towards a shared goal.
This means that if something goes wrong, instead of pointing fingers and blaming each other, the parties work together to find a solution.
NEC contracts are particularly valued for promoting partnership and cooperation, leading to more successful project outcomes – a must for reducing carbon emissions.
One of the key features of NEC contracts is their flexibility. They can be used for a wide range of projects, from small-scale renovations to large-scale infrastructure projects.
The contracts can also be tailored to suit the specific needs of each project.
Bespoke construction contracts
Bespoke contracts can be built specifically to suit the requirements of a project or can be tailored to your business for re-use on multiple projects.
A bespoke contract will be tailored and allows parties to incorporate their own specific terms. Such contracts are often used when standard form contracts are not suitable or do not tailor specifically to the requirements of the parties and/or works and/or the needs of the business.
Bespoke contracts may be needed when there are several parties involved in the project or when standard form contracts do not accommodate the uniqueness of a project.
Using a bespoke contract also saves the cost of purchasing one of the standard form contracts such as JCT or NEC.
The contract will include information relating to the parties involved and the specific characteristics of the build and any particular terms the parties wish to incorporate.
They are also likely to be influenced by the conditions of the market, the willingness of the parties and the requirements of the project.
A bespoke construction contact can be used for a variety of different projects, and it is up to both parties to decide whether to adopt a standard form contract or incorporate their own terms in a bespoke contract.
For example, a bespoke contract can incorporate terms as to unusual funding – a unique end-user organisation or the construction may be being paid for by a third party or fund, or there may be more than one customer involved in the project.
Choosing your contract
There are a range of factors to consider when choosing your construction contract.
JCT contracts are the most widely used within the construction industry and are particularly useful for private sector construction projects.
However, the NEC is best suited if you are looking to secure goods, works and services.
In certain circumstances, a standard form contract may not easily be tailored to your construction project. A bespoke contract provides a more personalised contract to fit the requirements of your build, prevent any difficulties along the way.
At Palmers Solicitors, we use our dedicated expertise to draft bespoke contracts and advise on any changes to standard form contracts, as well as assist with other related commercial agreements, such as collateral warranties.
For tailored advice on which contract is right for your project, contact our construction law specialists today.