An explanation of building contracts, what they include and where they can be sourced. A look at the inclusion of time penalties and the implications of including them.


Any agreement that a homeowner makes with a contractor to carry out work competently, and in return, should pay them the agreed amount, whether verbal or written, will result in a legal contract provided:`

  • There is agreement
  • There is consideration, i.e. an exchange payment for the works carried out
  • There is intention that both parties enter into the agreement

A contract gives the parties involved certain rights and duties which are enforceable in court. Although not essential to have a written contract it is a good idea to have written evidence in case things go wrong. Without a written contract it is your word against the contractors which can weaken your case if you are forced to take legal or have legal action taken against you.

The contract can include the following:

Type of contract

  • Earliest date of possession - the start of the contract
  • Extensions – the only reasons for an extension, e.g. weather conditions
  • Defects liability period – usually 6-12 months from the date of completion
  • Valuations – may be required in order to draw down further funds, outline when these will occur
  • Payment dates
  • Time penalties
  • Insurance details – ensuring the builder or contractor has the correct cover
  • Disputes – the appointment of an independent arbitrator prior to work starting in the case a dispute arises

The main source of building contracts is the Joint Contracts Tribunal (JCT). The contracts are not expensive nor are they difficult to understand. Most contracts have two elements, the contract form and the conditions.

‘Minor Works’ contract - for a reasonably large project with a medium sized contractor, the Minor Works contract will be suitable for works up to £150,000.

‘Standard form of Building Contract with Contractors Design’
- For ‘Design and Build’ contracts the contractor takes full responsibility for the design of the work as well as the construction.

‘Building Contract for a Home Owner / Occupier’ – This is a contract suitable for all domestic work. The contract form includes two copies (one for client and one for the contractor) and a set of conditions.

These documents can be sourced from RIBA Publications:

Federation of Master Builders – produce a contract for domestic work which is structured more for the contractor.


Time Penalties

These are usually financial penalties which are deducted from the contract price if the work is not completed to an agreed schedule. If you are likely to incur a financial loss or major inconvenience for a delay to the completion date, you could include a ‘penalty clause’ into the contract. Although this is nothing more than specialised forms of insurance you may find it difficult to source a contractor who is willing to accept the clause or you may pay more overall for the works described.


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