Last edited 13 Jan 2017

Construction contract conditions

Contract conditions set out the principal legal relationship between the parties to a construction project, determining the allocation of risk and consequently, price.

English law, unlike the codified legal systems in Europe, which recognise a duty of good faith, is not concerned with fairness but with certainty (unless it is a consumer contract protected by statute such as the Consumer Protection Act 1987 or the Unfair Contract Terms Act 1977 )

The construction sector has a wide range of standard forms of contract which are intended to balance the risk of the parties but more importantly, through extensive and repeated use, give rise to a certainty of meaning. Well known standard form contracts include the Joint Contracts Tribunal (JCT), the New Engineering Contract (NEC) and for international projects Fédération Internationale des Ingénieurs-Conseil (FIDIC). NB see the article on contracts for more information.

Standard form contracts also provide for different procurement routes, such as:

Construction management.
Design and build.
Design build finance and operate (PPP / PFI / DBO / BOOT).
Emerging cost contracts.
Engineering Procurement and Construction Contract (EPC) / Turnkey contract
Engineering Procurement and Construction Management contract (EPCM)
Furniture, Fixtures and Equipment contract (FF&E).
Framework agreements.
Management contract.
Measured term contracts
Measurement contract ('re-measurement' or ‘measure and value’ contract)
Partnering.
Prime cost contract / cost plus contract / cost reimbursable contract
Prime contracting / prime-type contracting
Traditional contract.

See the article on procurement routes for more information.

Typical conditions found in construction contracts can include (in alphabetical order):

Access to the construction site.
Assignment, rights of third parties and collateral warranties.
Commissioning.
Contractor's design.
Contract sum and adjustment,
Date for possession, deferment of possession, progress, delays, completion date, suspension of works and termination.
Dispute resolution procedures and alternative dispute resolution.
Employer's instructions.
Force majeure.
Information release schedule.
Insolvency.
Injury, damage and insurance.
Joint Fire Code.
Liquidated damages.
Net contribution clause.
Partial possession.
Payment, valuation (including off-site materials), certificates, fluctuations and retention.
Practical completion.
Project management and contract administration.
Quality of works.
Relevant events (compensation events), extensions of time and loss and expense.
Sectional completion.
Statutory obligations.
Sub-contractors.
Testing and defects (defects liability period)
Variations, prime cost sums and provisional sums.

Conditions of contract must be read in conjunction with specification documents, drawings bills of quantities, activity schedules and special conditions. Standard form contracts often comprise suites of contracts with ‘back to back’ subcontracts, consultant appointments and collateral warranties. The use of core conditions with option schedules or supplemental provisions is also now common (see NEC contract)