Building contracts define responsibilities and allocate risk between parties in a construction project. The Joint Contracts Tribunal provides standard forms of building contracts for different project sizes and types. The key parties are the employer/owner and contractor. Contracts establish risk management by apportioning risks like delays or unsatisfactory work between the parties.

1. Building contracts
Defining responsibilities, allocating
risk and calculating damages

2. What this unit is about
• Why a building contract is needed, and
who signs it
• The types of Standard forms of building
contract that are available from the
“JCT”
• How contracts are used in a building
project
• What other documents constitute the
complete set of “Contract documents”

3. Why do we need building contracts?
• Building works are expensive
– There is a lot of money at stake
• Building works are complex
– There are many different parties involved
• Building works are unpredictable
– Completion may
be delayed
– Builders may got
bankrupt
• Buildings are
needed at specific
times

4. The contract basics
• Building contracts are the same as all
other contracts
– party A promises to do x if party B
promises to do y
• Most commonly one party will promise
to pay the other party for providing a
service or product
– A building owner promises to pay a builder
for providing a new building (This is the
basis of any building contract)

5. What makes building contracts special?
• When you buy an existing product you can
satisfy yourself that it is worth the asking price
before you agree to pay.
• A new building does not exist when the
contract is signed…
– What will it be like?
– How competent is the
builder?
– What if there are
problems or delays?
– What happens if the
client doesn’t pay or
goes bankrupt?
• You need a good contract…

6. Types of contract
• A verbal agreement is a binding
contract, but fraught with perils
– What was agreed?
– Who agreed it?
– When was it agreed?
• A letter of appointment is a binding
contract, but it still will not describe the
building on offer in detail
• Best use a Standard Form of Building
Contract from the JCT

7. Joint Contracts Tribunal
• JCT established in 1931 to draw up agreed
forms of contract for the construction
industry
• Members
– Association of Consulting Engineers
– British Property Federation
– Local Government Association
– National Specialist Contractors Council
– Royal Institute of British Architects
– The Royal Institution of Chartered Surveyors
– Scottish Building Contract Committee Ltd
– Construction Confederation (went bankrupt in 2009)
• Guidance on choosing a contract available at
– www.jctltd.co.uk

8. First principles: the parties to the contract
• The contract exists between two parties
– The employer (the person who will pay
money in return for the completion of the
building, basically the building owner)
– The contractor (the person who will provide
the completed building for the agreed
payment. The contractor will not
necessarily construct the building, but is
responsible for getting it built)
• No one else is party to the main
contract.

9. First principles: the fundamental purpose of the contract
• Risk management
– The contractor runs a risk that he will not
be paid
– The employer runs the risk that the building
may be unsatisfactory in some way
• The contract terms establish the
apportionment of these risks between
the two parties
• Both parties agree to these terms

10. Types of JCT contract
• There are a great number of JCT forms of
contract, suitable for different values of
building projects
• The full range, with explanations of each
type, can be seen on the JCT web site. Look
at them here:
http://www.jctltd.co.uk/category/Contract-families
• The full contracts aim to reduce risk, but are
complex and push up administrative costs
• The simpler contracts keep costs down for
small works, but will not cover all
eventualities.
• The entire suite of contracts was revised in
2011

11. JCT 2011 suite of Building Contracts
1. Standard Building Contract
2. Intermediate Building Contract
3. Minor Works Building Contract
4. Major Project Construction Contract
5. Design and Build Contract
6. Management Building Contract
7. Construction Management contract
8. Constructing excellence Contract-signed by all of
bodies involved in creation of the building
9. Measured Term Contract- covers on-going minor
works
10. Prime Cost Building Contract-costs plus profits
11. Repair and Maintenance Contract
12. Home Owner Contracts

12. Standard Building Contract (SBC)
• This is the base form of contract used
for large, conventional building projects
where a contract supervisor is
employed
• It comes in three main forms,
approximate quantities, full quantities
and no quantities, depending on the
detail available.

13. Intermediate and Minor Works contracts
• These two categories cover projects in
descending scale.
• The demarcation between the size of
projects is never clear. The intention is
not to overburden a small project with a
needlessly bureaucratic overhead
• Each lesser contract increases the
potential risk if there is a problem, but
the scale of potential problems is also
less with reduction in size of project.

14. Management Building Contract
• Used for large, expensive projects
• The Contractor is appointed as a member of
the professional design team
• He/She does not build anything but sub-
contracts all parts of the project
• The benefit is that an experienced builder can
contribute to the development of the design
from the outset, rather than coming in after all
design is completed
• Not generally suitable for small projects

15. Homeowner Contracts
• The HO (Home owner) contracts are for use
in small scale domestic construction
• HO/B: Building Contract for Home
Owner/Occupier (where the client deals
directly with the builder)
• HO/C: Building Contract for Home
Owner/Occupier (who has appointed a
consultant)
• The employer is the owner-occupier of the
house
• The main purpose of these contracts is to
satisfy Unfair Terms in Consumer Contracts
Regulations 1999 .

16. Contract documents
• The formal contract is only one of the so
called “contract documents”
• The others may comprise:
– Contract drawings
– Bills of Quantities
– Specifications
– Schedules of Works
• These are all agreed, signed and kept
safe and unchanged for future
reference.

17. When is the contract used
• If all goes according to plan, the signed
contract documents will remain locked in a
safe and may never consulted.
• If something goes wrong or changes (supplier
fails to deliver, heavy rain delays foundation
works, architect is arrested for
embezzlement…) a good contract should set
out exactly the agreed course of action is to
be followed.
• The prime difference between the forms of
contract is the fineness of the detail of the
potential disasters which are addressed.

18. Project management
• The design is complete
• Permissions are granted
• The contract is signed
• A big project is about to start on site
• Millions of pounds are at stake
• This project needs to be managed
• To be continued…