Monday, March 10, 2014

The Importance of having a Written Contract for Household Building Work

Hindsight is a wonderful thing and it is usually only after a dispute has occurred that a householder will reflect on why they did not enter into a written contract in the first place. By this point however it is usually too late!

In general terms we are very trusting folk here in the UK and we often rely on good will as well as blind hope, in the expectation that work being undertaken to our homes will be done to a high quality, within agreed costs and without any problems.  In an ideal World this would no doubt be the case, however the reality is very different.  TV shows such as Rogue Traders, Cowboy Builders and the like highlight some rather stark examples where the initial excitement of building works have quickly evaporated and been replaced with anger, stress and worry, as the relationship between a building contractor and householders turns soar. I published an article about this time last year (link), which provided some practical suggestions of how a householder can avoid this scenario happening to them.  One of the suggestions I made within the article was to ensure that everything was recorded in writing (I mainly focussed on costs), however for this article I want to consider a more formal arrangement, such as the use of a written contract.

If a householder requires work undertaking within their homes, a usual first port of call would be a telephone conversation with a building contractor, followed by a visit.  During the visit the householder will outline what works they propose and the building contractor will give an initial assessment and invariably the conversation will come around to costs.  Very rarely, particularly at this point will the issue of a written contract be considered and in fact it is likely that the vast majority of works carried out within UK households, are completed without any written contract at all. Even in the absence of a written contract, a householder can enter in to a legally binding verbal contact with a building contractor, however, as you would imagine, in the event of a dispute, it will be much more difficult for either party to prove that particular terms and conditions were discussed and agreed. 

It therefore seems to make sense for householders and building contractors to enter into a written contractual agreement, which will clearly set out the various terms and conditions that they agree, but crucially however provide written evidence of the agreement.  Through the UK doctrine of freedom of contract, both parties are free to enter into whatever terms and conditions they want, without interference from the courts.  These terms and conditions could be written in whatever detail and format both parties are comfortable with and can range in complexity from a single sheet of A4 paper to a standard form of contract such as a Homeowner Contract or a Minor Works Contract.  There are many other standard forms of contract available, however, the nature and complexity of the vast majority of householder’s works will not require anything more complex than those contract types indicated above. Standard forms of contract can be ordered on line and vary in costs depending upon the selected contract.  For example a householder can purchase a JCT Homeowners Contract at a cost of around £20 (link), which given the disputes and costs that can be avoided is money extremely well spend.  These types of contract are written in a very understandable way so you do not need to be an expert in order to use them.  Also, standard forms of contract allow for adding and deleting of clauses, sections and words as deemed necessary by each party, prior to signature.  Just remember to undertake amendments carefully, as once the contract is signed, both parties are legally bound by the terms.

In the event that a dispute arises during or even after the works have been completed both parties can refer to the written contract to help them to resolve the dispute.  All too often disputes occur and indeed escalate because there is a difference of opinion about ‘what was said’, or ‘what was agreed’.  A simple written contract can therefore set out terms for costs, payment dates (and amounts), timeframes. More detailed contracts will stipulate procedures for variations, dispute resolution, insurance provisions, procedures for termination etc. Without a written contract both parties are exposing themselves to unnecessary risk and uncertainty should a dispute arise. This is something that householders often choose to ignore when undertaking building works in their homes, possibly as a result of lack of awareness, possibly ignorance, possibly not wanting to be viewed as ‘unfriendly’ by the building contractor and even possibly just plain acceptance that there just will not be a written contract.  Hindsight is a wonderful thing and it is usually only after a dispute has occurred that a householder will reflect on why they did not enter into a written contract in the first place. By this point however it is too late!

The lesson here therefore has to be that once a householder discusses work (and costs) with a building contractor, they should ensure that they also make the building contractor aware that they plan to ask them to sign a written contract prior to the works commencing.  In order for this to happen the householder should be satisfied with the scope of work proposed, the timeframe suggested and of course the overall cost of the works, are what they expect and therefore what they are prepared to agree too.  This may require a number of weeks (possibly longer) of negotiation between both parties in order for them to arrive at mutually agreeable terms.  Once this happens both parties will understand what is expected of them and this will help to eliminate any uncertainty.  This in turn will reduce the possibility of disputes occurring and in any event, will provide a way of dealing with disputes should they arise.  If you are a householder planning an extension or a refurbishment or in fact any other building works to your home, in the immediate or near future it is worth taking the time to prepare and negotiate a written contract with your building contractor prior to works commencing for all of the reasons discussed above.

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