Construction contracts can take many forms. They can be bespoke terms and conditions of a business or standard form contracts such as JCT or NEC. In fact, they do not even have to be in a written form!
For a contract to be considered a construction contract, it needs to be an agreement in relation to construction operations. This could be for the following:
- The carrying out of construction operations
- Arranging for the carrying out of construction operations by others or
- Providing labour for the carrying out of construction operations (see Section 104(1) of the Construction Act 1996).
What are construction operations?
Construction operations are defined in Section 105(1) of the Construction Act 1996. To give a few examples, those include the following:
- Construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land (whether permanent or not);
- Construction, alteration, repair, maintenance, extension, demolition or dismantling of any works forming, or to form, part of the land, including walls, roadworks, power-lines, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence;
- Installation in any building or structure of fittings forming part of the land, including systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or security or communications systems;
- Preparatory works such as site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection, maintenance or dismantling of scaffolding, site restoration, landscaping and the provision of roadways and other access works;
- Painting or decorating the internal or external surfaces of any building or structure.
Certain works are not considered to be construction operations such as drilling for, or extraction of, oil or natural gas, extraction of minerals, to name a few.
Why do I need to know if my contract is a construction contract?
As defined above, if you have a construction contract, you will have a statutory right to refer a dispute relating to such a contract to adjudication. An adjudication is a formal process of resolving a dispute, usually within 28 days. Therefore it is often preferred and more cost-effective than engaging in protracted litigation (see our article on the process for more details).
Having a construction contract also means that statutory payment terms will apply to contracts where the payment provisions agreed by the parties do not comply with the Construction Act 1996.
It is also worth noting that “pay, when paid” clauses in construction contracts are prohibited. The contractors have a statutory right to suspend their works due to non-payment, provided that an appropriate notice is issued (please seek advice before serving such notice as failure to do it correctly could put you in breach of contract).
The implied terms above do not apply to contracts with residential occupiers, and there is no automatic right to adjudicate a dispute.
If you think you might have a construction contract and wish to understand more about the statutory rights and provisions that apply to those, please get in touch with one of our construction lawyers.