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What happens when building contracts are not followed...

You have probably read my previous post about contracts and why they are important.

If not, stop now and go read the post ⬇️

Ultimately the contract is your insurance policy that protects you. But! It’s often not as easy as plonking a signature at the end of the page and hoping for the best.

If we are talking about Joe Bloggs and his fence - the risk of something going wrong, being misunderstood or inaccurate quality are fairly small. However if we consider a regular refurbishment project with a value of say £250k - the risk of things going wrong increases dramatically.

Thanks to years of experience where people have failed, we now have something called Standard Contract Forms. These are usually published by the JCT (Joint Contracts Tribunal) or NEC (New Engineering Contract). These books help out in addressing the most common issues arising in the construction industry. They lay out the rules and procedures everyone should follow. The issues really start when people don’t follow them. So Below I have explained the 4 most common problems that arose because people did not follow the contract signed.

  1. Payments Most of the JCT contracts state how often payments should be made. For the purpose of this article let’s say payments will be made once a month on the 5th of every month starting from January. That means that (unless the terms have been changed) the valuation date falls on the 5th of every month. If we have a situation when the 5th is a Sunday it’s the closest business day (so Monday). The contractor can submit a payment application (it can be differently named depending on the exact form used) before that. The Contract Administrator is obligated to issue an interim payment certificate no later than 5 days after the valuation date. Based on that the contractor would normally send the invoice and be paid within 14 days from the valuation date.

For the sake of this blog let’s assume that the client called Mr X is not happy with the work and doesn’t want to pay the entire amount due. So he ignores all of the documents and transfers to the contractor less money than certified. Can he do that? No. What happens if he does? He is breaching the contract. And that effectively means that the contractor can pursue a claim to recover the money.

What should Mr X do? Read the contract! Depending on the exact copy he would need to issue a Pay Less Notice to the contractor no later than 5 days before the final payment date.

  1. Delays It’s one of those can of worms subjects. Building work is always delayed for one reason or another but really the core issue is whether there delays have been notified, logged and if it is actually possible to prove what the actual cause was.

Whether or not people are strict in enforcing their rights under the contract it’s another matter but there are always 3 main reasons for delays:

  • contractor is at fault eg underestimating the time required

  • client is at fault eg loading the project with changes and variations

  • the cause was outside of control of both parties eg covid and lockdown

Depending on who is at fault - that side pays damages to the other side generally speaking. But what happens more often than not - is that people don’t have a programme to start with (baseline programme) , don't update it along the line and then wake up a couple of weeks before the deadline trying to clock back several months. Sounds familiar? Yeah…

  1. Clear communication As many times as I have been involved in a JCT contract (and it will be hundreds of times by now) there is always someone who thinks they are actually helping / speeding things up by ignoring procedures and talking directly to whoever 🙄

Ehhh sounds familiar? The main aim here is to cut the conversation about nothing. I still remember from my times on sites when we would have a client and whoever designer walking around the site discussing whatever… paint colours, tiles layouts, lighting positions, anything. Pretty harmless until they would start instructing tilers, electricians, decorators and other trade people what to do and how. In their head they would be helping out and speeding up the process. In reality they would only be causing confusion.

Say they decided on site that they want to move a light 250mm to the left. They would tell the electrician to do it. He would get it done, rip the ceiling open, move the light without telling anyone else and invoice the builder directly for the work. The builder would pass the bill to CA who knows nothing about this change so would not authorise it. That makes everyone upset because they are either not getting paid or they are unaware of changes requested. And all that was needed was going through the right path.

  1. Client on site Clients get excited about their projects and this is something to be conscious of. It happens as often on the large projects as it happens on the little ones. Mr and Mrs Y want to see the works progressing. They come to the site every day. They watch the workers, they get more confident in talking to them, asking and requesting things.

Is this really a crime? No it’s not. But it definitely slows down the project, impacts the team and requires extra involvement from people. Whatever it is that you do, whether you are an accountant, bricklayer or shop assistant. How do you feel knowing that someone is watching you? How do you feel knowing the director of your organisation is constantly keeping an eye on you?

If that was me I would feel pressured, monitored and untrusted. Not really at my most productivity for sure.

Does the contract allow it? Well. Is access at reasonable times considered as ‘every day’? I’ll let you answer that. How would you address this issue?

Coming back to the conclusion. JCT contracts are there to make your life easier. You don’t have to reinvent the wheel. Someone tried in the past, failed, got burned, lost a lot of money and put together a contract that would help others avoid the same issues. All you need to do is read it, understand it and follow what is required 😁

And if you need help you can always book a contract session with me HERE

Is it also about what gives the client confidence not to turn up because they know it's going well.

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