Build Business the Right Way
Involved in a construction project of any size? Our Head of Commercial Litigation, Partner Philip Edmondson says it is essential to have the right documents and comply with them to avoid something worse than rough justice.
Whenever you are getting involved in a construction project, however large or small, it is critically important that you have your ducks in a row by way of proper contracts and a good team of professional advisers. The pitfalls for the unwary are as numerous as they are nasty.
Whether you are the developer, the builder, the architect or the subcontractor, you run a very serious risk if you do not deploy the right contractual documentation and ensure that adherence to it is monitored and updated throughout the construction process.
More and more, our litigation team is seeing parties to development projects fall out and quite often we are finding that their contractual documentation is either defective or has not been referred to when seeking to resolve the disputes. Failure to adhere strictly to the terms of a contract in construction scenarios can lead to very “rough justice”. By rough justice I mean, where a party might be in the right with a chance at redress in many other scenarios, the terms of a construction contract are often so prescriptive and the timeframes so tight, they may be denied a remedy. This is why having someone to advise you on the right construction contract to use and how to comply with it and what to do if things go wrong, can be absolutely critical.
One useful suite of industry-recognised construction contracts which the parties can choose are JCT Contracts (in the spirit of balance I must note that other standard contract suppliers are available!). JCT was established in 1939 by the Royal Institute of British Architects and the National Federation of Building Trades Employers. JCT have devised contracts for most forms of construction project ranging from a single dwelling or extension to a huge commercial skyscraper.
JCT contracts explained
First of all, you must make sure that you receive advice from an experienced person on what to include and, just as importantly to delete, in a JCT Contract. JCTs use a standard form to minimise the cost of entering into a contract and provide benchmark provisions so that few things are left out and unnecessary things are not included. This is very useful, but you should still seek expert help in deciding what should be in there.
JCT contracts facilitate the process of delivering a building project. In simple terms they set out the responsibilities of all the parties within the process and their obligations to each other. In this way it is then clear what work needs to be done, who is doing it, when they are doing it by and for how much.
Under the JCT, if you are property owner and/or developer you are defined as the employer within the contract and the contractor as the contractor. The other entity which will need to be a party to the contract will be the architect or project manager.
The JCT approach clearly defines the parties’ responsibilities and apportions risk in a way that is appropriate for the project they are supporting. This apportionment will differ between a minor single residential development and a large-scale commercial build. It allocates risk in a fair and rational way and reflects the benefits that have been accrued through both legal and best practice precedent over the years.
JCT contracts will be well recognised by the professional team such as the lawyers, architects and building contractors involved in a project. It therefore reduces enormously the amount of time and resources required to get to the start point of your project.
When things go wrong - Adjudication
A JCT Contract will always be very clear and prescriptive about deadlines for payments, attempts to pay less than is sought, notifications to be provided by the architect or the employer and all other payment-related items.
The timescales for corresponding with the other parties with regard to monetary issues are generally tight and strict. In many instances failure to comply with a timescale will lead to the loss of important rights and financial prejudice. Accordingly, it is critical that you seek advice from your professional team the moment there are signs of trouble or you disagree with another party to the contract’s position on a monetary issue.
If matters are not resolved then the parties have a right to submit their grievances to an adjudication. This is a statutory scheme prescribed by and detailed in the Housing Grants, Construction and Regeneration Act 1996, commonly known as the Construction Act. Adjudication is a process whereby an experienced surveyor or lawyer will review the parties’ evidence within a swift 28-day timeframe and reach a decision. The decision is usually determinative of the dispute between the parties as the courts are very reluctant to look behind an Adjudication Award.
Adjudication is itself a “rough justice” approach to dispute resolution which contains tight timescales and potential draconian punishments for not engaging with it in a swift and professional manner.
McCormicks can assist with any dispute relating to construction projects whether by Adjudication, court proceedings or (hopefully) before it has reached either of those points. We are also well connected to other professionals who can assist with the non-contentious aspects of any construction project.