
Construction projects can be both complex and high-risk, which means legal agreements are vital to the success of a project.
Whether you are a developer, contractor, or sub-contractor, a well-drafted contract can protect your interests and set out a clear process for potential disputes further down the line.
There are some key clauses and considerations in construction contracts that are essential to get right from the start.
Scope of work
One of the most important clauses in a construction contract, the scope of work clause describes in detail what work is to be performed.
It should clearly define the extent and limitations of the work to be carried out, as well as outline how changes to the scope of work will be addressed.
The latter element is essential, because changes are often made after the contract has been awarded due to various unforeseen circumstances.
A poorly defined scope of work can result in misunderstandings or disagreements about what was originally agreed, leading to project delays and cost overruns.
To mitigate such risks, it is important to have a clear and mutually agreed scope of work clause in your contract.
Variation
A variation clause outlines how changes or additions to the original scope of work will be managed and how they will impact costs and schedules.
The clause should clearly detail the procedure for requesting, approving, and implementing variations.
This could include the requirement for written instructions, procedures for adjusting the contract price and completion date, and the contractor’s rights if the client requests many variations.
Preliminaries
Preliminaries are essential because they outline the necessary items and services that are necessary for the contractor to complete a construction project successfully.
These items and services can be easy to overlook, but they are crucial to ensure that your project runs smoothly.
For example, a construction project may require the use of scaffolding, which is necessary for workers to safely access higher areas of the building. Without this, the project could be delayed or put on hold due to safety concerns.
In addition, preliminaries also help to establish the overall cost of the project.
By including site overheads and field office costs, you can accurately estimate the total cost of the project and ensure that everyone involved in the project is aware of any additional expenses.
Preliminaries are also often used to calculate any potential loss and expense claims that a contractor may have.
Payment terms
The payment clause governs how the contractor will be paid for the work undertaken.
This includes the contract price, payment schedule, the basis for valuing work, procedures for issuing payment notices, and how disputes about payment will be resolved.
In construction contracts, payment term clauses must abide by the Construction Act, which provides parties with a right to payment throughout the contracted work when the works are programmed to last 45 days or longer.
If no payment framework in the contract exists, the relevant statutory scheme may apply in its place.
Time and delay
The clause addressing time and delay should establish the project timeline, completion date, and the consequences of not meeting these deadlines.
It should also include provisions for extending the completion date in certain circumstances, such as delays caused by adverse weather, as well as the value of Liquidated and Ascertained damages (LADs).
Fluctuation provisions
Fluctuation provisions provide a mechanism for an uplift in the cost of materials and/or labour.
Many of the standard form contracts include standard provisions for price fluctuations and a mechanism for them to be calculated.
However, they must be specifically included in order for these provisions to apply.
Force majeure
A force majeure clause can cover businesses in the face of unprecedented events such as natural disasters.
However, the standard force majeure clause does not cover the economic difficulties that a country may be facing.
A bespoke force majeure clause may be required to account for specific circumstances that could affect the project.
Dispute resolution
Even with the most well-drafted contract, disputes can still arise.
A dispute resolution clause provides a clear process for handling disagreements.
Under the Housing Grants, Construction and Regeneration Act 1996 (also known as the Construction Act), every qualifying UK construction contract must allow for adjudication as a way of resolving disputes.
Termination
Termination clauses can allow a customer and both parties, in certain circumstances, to terminate a contract at convenience, as long as there is the necessary notice given.
Instances of termination provisions could be failing to deliver information to meet the other’s obligations, failure to pay any amount due, or experiencing a change in the control of the company.
Breaching these provisions would result in the other party being able to terminate the contract, which could cause cash flow issues for your business.
Considered contracts with Palmers Solicitors
By ensuring that your contract gets the essential clauses right from the start, you will be well-positioned to safeguard your interests, manage risks, and set the stage for a successful project.
At Palmers Solicitors, we can help you prepare construction contracts that get the essentials right from the start, putting you in the best position to deliver a successful project.
Contact our construction law experts today for tailored advice and guidance.