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Selecting the most appropriate building contract for a small domestic project

Professor Sarah Lupton and Manos Stellakis, authors of Which Contract?, discuss building contracts that might be considered for projects where the client is carrying out work to their own home.

04 March 2022

Ensuring that you select the correct building contract for your client or project is key. Having a building contract that includes the appropriate clauses and conditions to match the requirements of the project is paramount.

This article discusses building contracts that might be considered for projects where the client is carrying out work to their own home.

It considers two forms of ‘consumer’ building contracts, specifically drafted for domestic projects:

In practice, contracts intended for commercial use are often used on domestic projects, and the following examples are also considered:

We will focus on the key requirements for domestic projects, including legislative constraints and client preferences as to quality, time, cost, and dispute avoidance. It will compare how these forms may comply and, in all cases it considers the unamended forms. For ease of reference a comparative table highlighting the differences between the contracts and what they cover is included below.

The shorter contracts compared to domestic building contracts

JCT ICD JCT MWD JCT HO/C & HO/B RIBA DBC
Contract length (RIBA DBC = 1L) 4.3L 2.3L 0.3L 1L
Independent decision maker/CA Yes Yes Yes, HO/C only Yes, or option for Client as CA
Drafted for consumer clients No No Yes Yes
Customer cancellation No No Yes Yes
Collaborative working clause Schedule 5 /1 Schedule 3/1 No 3
Contractor Design Portion (CDP) Yes Yes No Optional
CDP submission Schedule 6 2.1.3 No 15.2
Client selected subcontractors Yes, Named but not for CDP No No Optional
Professional Indemnity Insurance required Yes No No Yes
Programme required No No No Optional
Completion in Sections Yes No No 17
Partial possession Yes No No 9.12
Listed items 4.10 No No No
Variation quotation No No No 5.11
Variation and EOT rules Yes No No 5.11
Loss/expense Yes Limited Limited Yes
Liquidated damages Yes Yes No Yes
Insurance backed guarantee No No No Optional
Advanced warnings/risk register No No No Risks register, 3.1.3, Advance warning 3.2
Sustainable development, environmental considerations Schedule 5/4 Schedule 3/4 No No
Supply chain control Yes, including Named Yes No No
Collateral warranties/Third party rights Section 7 No No No rights



Specificity

Why is it preferable to use a specially drafted standard form of building contract?

Most clients for domestic projects would be acting as ‘consumers’. They are individuals, not companies, and not entering into the project in the normal course of their business1. Consumers are protected by the Consumer Rights Act 2015, which requires all terms to be ‘transparent’ (i.e. expressed in plain and intelligible language) and provides that any ‘unfair’2 term can be avoided by the consumer. The RIBA DBC and JCT HO/O are both drafted to comply with these requirements. Although some commercial contracts may appear clear, they would need to be screened for terms that might be potentially unfair.3.

In addition, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 require that all consumers are provided with the information on the right to cancel, including the procedure to be followed. If this is not provided, the normal statutory cancellation period of 14 days can be extended by up to a year4 (a significant risk to the contractor). Both the RIBA DBC and JCT HO/O include a cancellation form, a convenient addition for consumer client and contractor.

Format, flexibility

A common request by domestic clients (and smaller contractors) is that the contract should be short and simple, so that it provides a helpful point of reference and minimises the risk of misunderstandings and disputes. Domestic projects are not necessarily straightforward, and can sometimes be larger and/or more complex than many commercial schemes. This creates a tension between the desire for brevity, and the need for a wide range of provisions to deal with changing circumstances. Selecting the right ‘toolbox’ for the project requires careful consideration of a range of criteria.

Roles

A starting point is, who will be involved in the project? The RIBA DBC and JCT HO/O both include a role for an independent contract administrator (CA), as do the commercial contracts. The RIBA DBC and JCT HO/O both also envisage a situation where the client may wish to deal directly with the contractor. The JCT HO/O comes in two versions: one including a Consultancy Agreement, where a consultant is appointed to oversee the work; and the second where a consultant has not been appointed. The RIBA DBC has an option (clause 19) where the client can act as CA. If the client prefers this arrangement, perhaps because they have already worked with this contractor, then one of these forms would be a suitable choice.

Quality

Determining quality and performance is an integral part of the design of the project, so the question of who will be carrying this out is critical. In most projects the majority of the design will be carried out by the architect or design team, however there is usually some reliance on the contractor and/or specialist sub-contracting firms to complete detailed aspects of design, such as the mechanical, electrical and power systems.

The RIBA DBC, like JCT MWD and JCT ICD, allows for main contractor design, although it should be noted that JCT MWD does not require the contractor to hold PI insurance for this role. The JCT HO/O requires the contractor to provide works that are described in documents forming part of the contract; there is no mention of the contractor undertaking design, or what the consequences would be if it did. It is therefore sensible to restrict the use of the JCT HO/O to simpler projects with no contractor/sub-contractor design.

The RIBA DBC allows for both contractor design, and for the client to select sub-contractors for specific work; these two provisions can be linked to enable pre-selected sub-contractor design input. This can be very useful where the client has identified preferred firms, for example kitchen suppliers, bathroom specialists, or joinery firms, and/or wishes to develop a long-term relationship with such firms. There is no similar provision in the JCT HO/O or indeed in the JCT MWD.

The JCT IC and JCT ICD contracts do allow for client selected sub-contractors, although not for design which forms part of the Contractor Design Portion in the JCT ICD, but the contractor is not responsible for the client selected sub-contractors’ design, only for the workmanship and timing. The RIBA DBC arrangement is far less risky for the client, given that the contractor remains entirely responsible for all aspects of their performance (clause 2.6).

Timing

Domestic projects where a client may wish to remain in occupation often require careful pre-planned phasing, and the ability to respond to unexpected developments, The RIBA DBC allows for the work to be carried out in pre-defined sections with separate start and completion dates. It also allows the client to defer the start date of any or all of the sections, and to occupy parts of the project before the whole of the works are complete. The JCT HO/O, at only 11 pages in contrast to the RIBA’s 32 pages, unsurprisingly does not include any of these features. These options are also absent from JCT MW/MWD. Apart from the RIBA DBC, only the much longer JCT IC/ICD offers these features.

Another key omission in JCT HO/O is a liquidated damages (LD) clause. If the contractor runs over the deadline the client would still be able to claim general damages, but these may be difficult to assess (for example, the cost of temporary accommodation for a whole family at relatively short notice). A LD clause avoids arguments about appropriate compensation, and allows the parties to manage the risks in advance. The RIBA DBC does contain a LD clause, similar to how the JCT MW/MWD and IC/ICD allow for LDs.

Cost

Most clients, domestic or commercial, would prefer cost certainty and predictability. A lump sum contract is the best method of providing this but requires full and detailed contract information to be supplied at tender stage. This can be difficult with most domestic projects, especially if the work is to an existing building, as there may be unknowns that cannot be established before work has begun. The brief may also evolve as demolition progresses and spaces/new potential uses emerge, and the client re-thinks their priorities.

The RIBA DBC can be let on a lump sum, or a rates basis, or a mixture of these (the parties set out the pricing document to be used under section D). Inclusion of some carefully defined rates commits the contractor to providing work at a fixed price, but allows for flexibility on the amount, without the need for multiple variations. The JCT MW/MWD, JCT IC/ICD and JCT HO/O all assume the contract will be lump sum, although JCT IC/ICD does allow for a range of priced documents, in which rates could be introduced.

The JCT MW/MWD and JCT IC/ICD assume that payment will be on a monthly basis. Under the RIBA DBC the default is monthly certification, but the parties may specify an alternative period (perhaps fortnightly for smaller projects). The RIBA DBC additionally allows an option for a milestone arrangement whereby the contractor is only paid when pre-determined portions of the work have been completed. The JCT HO/O, which has the simplest provisions, only allows for a single payment at the end or at agreed stages, and avoiding the payment/pay less notice provisions included in all the other forms.

Dispute avoidance, early warning and risk register

The RIBA DBC contains dispute avoidance mechanisms, whereas the JCT HO/O doesn’t. The JCT commercial building contracts include a collaborative working clause (in the Supplemental Conditions), and prompt notification and negotiation of matters that may give rise to a dispute. The RIBA DBC includes advance warning/joint resolution of delays, the requirement to hold a pre-start meeting, encouraging the use of a risk matrix (clause 3.1-3.3), and an option to require the contractor to submit a programme at this meeting (clause 14).

Context

Contracts with a consumer who is not a ‘residential occupier’5 are subject to the Housing Grants Construction and Regeneration Act 1996 (an example might be where a client is temporarily residing in a property but intends from the outset to let it out on completion, see Westfields Construction Ltd v Lewis.6). The Act requires particular terms relating to payment and a 28-day adjudication procedure to be included. The RIBA DBC (but not the JCT HO/O) complies with regard to payment, but not in respect to adjudication; in such cases it may be sensible to replace the RIBA Scheme with a reference to the statutory adjudication scheme, as set out in RIBA Concise Building Contract (RIBA CBC).

In cases where the consumer client is also a ‘residential occupier’, the project is not subject to the Housing Grants Construction and Regeneration Act 1996 and statutory adjudication does not apply. The JCT HO/O and RIBA DBC both offer the option of referring a dispute to the RIBA Adjudication Scheme for Consumer Contracts, a 21-day procedure with a capped adjudicator fee, currently at £2,250+VAT. This would be very useful for obtaining a quick, temporarily binding decision on smaller disputes, at a relatively low cost. For larger domestic projects, clients should consider whether this tight time frame will be sufficient to respond to contractor claims, and may wish to consider methods with a longer or more flexible programme, such as a short form of arbitration, and amending the contract accordingly.

Summary

To summarise, from the range of shorter standard contracts, most are primarily intended for commercial projects and two are drafted specifically for domestic projects. These two are the RIBA DBC and the JCT HO/O. The JCT HO/O, at a third of the length of RIBA DBC, is less detailed, however, the building work would need to be defined clearly in advance, the project would need to be straight forward in nature, with no contractor design, and timing would not be a critical factor. From the shorter contracts that are intended for commercial projects, and would therefore need amending to suit a consumer/domestic client, the JCT ICD would be an option where there is extensive contractor/subcontractor design and drawing approval procedures and/or terms to cover off-site manufacturing are critical. For many domestic projects the RIBA DBC is the obvious choice as it has been drafted specifically for consumer/domestic clients, balances clarity with flexibility, and incorporates a wide range of provisions, found only in the longer commercial contracts.

[1] Consumer Rights Act S2 (3).

[2] I.e. terms that ‘that cause a significant imbalance in the parties’ rights and obligations … to the detriment of the consumer’, Consumer Rights Act S62 (4).

[3] Note that in Domsalla v Dyason [2007] EWHC 1174 (TCC) pay less notices were found to be unfair in relation to a consumer, but this was is special circumstances and has not been applied in later cases.

[4] Section 31

[5] HGCRA s106(2. Note that a ‘residential occupier’ would always be a consumer, see Edenbooth Limited v Cre8 Developments Limited [2008] EWHC 570 (TCC)

[6] [2013] EWHC 376 (TCC)

Thank you Professor Sarah Lupton and Manos Stellakis for providing this article.

The RIBA Domestic Building Contract, together with all of the other RIBA Professional Services Contracts, are available digitally from RIBA Contracts Digital – www.ribacontracts.com.

Professor Sarah Lupton MA DipArch LLM FCArb CArb RIBA, is a partner in Lupton Stellakis and directs the Master of Design Administration and the Diploma in Professional Practice at the Welsh School of Architecture. Sarah is dual qualified as an architect and as a lawyer.

Manos Stellakis BSc DipArch MSc(Econ) RIBA, RIAS, is a partner in Lupton Stellakis and Expert Consultant (past title, Distinguished Visiting Fellow) at the Welsh School of Architecture. Manos teaches and examines at a number of schools of architecture including the AA, Bartlett, De Montefort University, University of Westminster, WSA, and, at the RIBA’s ADPPA.

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