understanding riba building contracts · pdf fileboth riba building contracts provide an...

Briefing document: Understanding the Royal Institute of British Architects (RIBA) Building Contracts

5 November 2014

www.ribacontracts.com 2

Table of Contents

Part 1 – Introduction Part 2 – Why new contracts? The reason for the publication of the RIBA Building Contracts Part 3 – The RIBA Domestic Building Contract and the RIBA Concise Building Contract Part 4 – Comparison with other contracts


Part 1: Introduction The RIBA Domestic Building Contract and the RIBA Concise Building Contract are simple

but comprehensive and are designed to facilitate successful completion of projects

undertaken using them.

Both RIBA Building Contracts provide an alternative for clients by offering a more user-

friendly, flexible contract for use in domestic and minor works projects. For domestic

projects the RIBA Domestic Building Contract is an important alternative for clients who

may have been following the more risky and dispute-prone route of using commercial

contracts for their domestic projects. Both contracts are written in plain English, reflect

current law and contain terms to deal with the real issues that arise during modern

construction works. The contracts also address several issues not covered by existing

standard forms and provide simple solutions to recurring areas of dispute.

This briefing introduces the new RIBA Building Contracts and sets out their major features;

it compares them with contracts from other publishers and gives answers to frequently

asked questions.

Part 2: Why new contracts? The reason for the publication of the RIBA Building contracts With a vast number of ‘standard form’ building contracts currently available in the UK

market, the first question to be answered is: does the construction industry need a new

building contract?

The answer is yes, emphatically. Research has shown that there is a shortfall in both the

‘domestic’ sector involving works to a client’s home and the ‘minor works’ sector concerning

simple commercial building works with a need for substantial improvements in the

contractual arrangements available.


Domestic Building Sector

Contracts here are described in law as being between ‘Consumers’ and ‘Suppliers’.

The law provides additional protection to consumers over and above the rights they would

have under a commercial contract.

Over the years there has been a boom in the home improvements market, and the types of

building work undertaken are now more substantial. However, the contracts used have not

evolved to take account of the changes in the types of work nor reflected reforms in

contract administration practice.

For instance, while it is now common for a building contractor to undertake the design of

parts of works such as plumbing or electrical installations, existing consumer construction

contracts do not provide for contractor design. The RIBA Domestic Building Contract

contains clauses to deal with this and several other areas that are not well covered by

existing publications. These include:

• Instructing change: changes may be required because of an amendment to the

client’s requirement or unforeseen circumstance discovered after the building work

has started. The process of instructing the change and agreeing any revision to the

contract price is not dealt with effectively in many existing consumer construction

contracts.

• Contract Administration: many existing consumer construction contracts restrict the

power of the person overseeing the contract on behalf of the client. For instance,

there may be no provision for the power to open up and inspect defective works. In

practice, this may reduce the ability to ensure that the work is of a high standard.

• Programme: some existing contracts do not require the provision of a programme of

work by the contractor. As a result, managing the timing and sequencing of

activities can become difficult.

• Payment: the payment mechanisms in most existing contracts do not deal

adequately with timing of payment and the consequences of non-payment, and this

sometimes leaves the contractor at a disadvantage.


• Insurance: insurance clauses in most existing contracts rarely address contractor

insolvencies or recognise the difficulty customers face in obtaining adequate

insurance for work at their home.

• Defective work: many existing contracts fail to provide a clear process for dealing

with defects that appear after practical completion. This can leave the parties in a

difficult position if, for example, the contractor fails to turn up to fix them or takes an

unreasonable length of time to do so.

• Consultants: available consumer construction contracts often have no provision to

record the appointment of sub-consultants (e.g. structural engineers, cost

consultants) although they are increasingly used on domestic projects.

• Liquidated damages: these are payments from the contractor to the client to cover

the client’s additional costs if there is a delay caused by the contractor in completing

the building work, thereby providing the client with a secure mechanism for

recovery. The alternative is to go to court which can be costly and time consuming.

Some existing contracts do not provide for liquidated damages.

• Collaboration and risk management: these provisions allow the parties to work

together and manage potential risks in advance of their occurrence in the project.

This means the contracts can be used as a tool for proactive management of the

project, rather than only having relevance when a dispute arises. Most existing

consumer contracts do not cover collaboration and risk management.

Some trade associations have published domestic building contracts which are weighted

heavily in favour of their members. These contracts often have terms requiring the client to

pay in advance of the work being carried out, or terms releasing the contractor from timely

completion of the building work, among other one-sided terms.

One solution typically proposed by consultants and contract advisers, to cover for the gaps

in existing consumer contracts, is to recommend the use of a commercial building contract,

e.g. a small/minor works contract. However, this practice can create serious difficulties.


Commercial contracts are not drafted with consumer clients in mind and do not conform to

the requirements of consumer protection legislation1. Additionally many of the terms in a

commercial building contract introduce unnecessary administrative bottlenecks for

domestic projects and do not facilitate the timely completion of the building work. Such

terms include payment provisions with extensive procedures and dispute resolution clauses

which do not foster amicable settlements of differences.

In practice, when using commercial contracts for domestic projects, substantial redrafting is

required, adding legal costs, as many of the terms would have to be individually

renegotiated with the consumer client.

The RIBA Domestic Building Contract has been published to remove these difficulties. It is

simple, drafted to comply with consumer protection regulations, is comprehensive and

using optional clauses to cover a wide range of works. Compared with the small works

commercial forms, it gives the client, contractor and consultant a more balanced contract

which should result in successful and timely completion of residential building projects.

Minor Works Commercial Building Sector

This includes simple commercial building works. In this sector there are a large number of

standard form building contracts and considerable confusion on the circumstances under

which each contract is appropriate.

However, despite the large number, these contracts typically fail to address simple issues

which are recurrent in practice e.g. provision of a programme by the contractor. Even

where some of the issues are addressed, the clauses are often not comprehensive. An

example of this is contractor design. While existing contracts recognise this as common

practice and provide an option for contractor design, they regularly fail to provide for

Professional Indemnity (PI) insurance in respect of that design. In practice, this means that

if there is an error in the contractor’s design, the client may have difficulty obtaining

financial compensation.

1 Commercial building contracts may contain terms viewed by consumer regulations as unfair terms. Also commercial building contracts are not always expressed in plain, intelligible language.


The RIBA Concise Building Contract contains clauses to deal with these issues

comprehensively and several other areas that are not well covered by existing publications

including:

• Valuation of changes: the process of assessing the costs and time implications of

changes2 instructed during the works is not always effective. In some cases,

negotiations and arguments continue many months after the change was instructed,

and research3 indicates that this is a recurring subject for dispute.

• Programme: some existing contracts do not require the provision of a programme of

work by the Contractor. As a result, managing the timing and sequencing of

activities can become difficult.

• Completion in Sections: allowing the selection of different completion dates for

various parts of the works gives a client the option to take over and make use of

those parts while construction continues on other parts of the building. Completion

in sections is a useful tool for management of larger projects (converting a large

house into apartments, or developing a centre with several separate units)

• Payment: the payment mechanisms in most existing commercial contracts do not adequately deal with all types of projects; this is especially true for small commercial works of duration of 45 days or less.

• Contract Administration: many existing contracts do not adequately define the

duties and obligations of the person overseeing the contract (consultant) on behalf

of the client. This creates ambiguity. The RIBA Concise Building Contract provides

clear and comprehensive clauses on the duties and powers of the consultant.

• Collaboration and risk management: these provisions allow the parties to work

together and manage potential risks in advance of their occurrence. The

collaboration clauses under some existing contracts are wide4 and therefore not

2 Changes may be required because of an amendment to the Client’s requirement or unforeseen circumstance discovered after the building work has started. 3 NBS National Construction Contracts and Law Survey 2014. 4 An example of a widely drafted clause use in practice is ‘…shall work with each other and with other project team members in a co‐operative and collaborative manner, in good faith and in a spirit of trust and respect. To that end, each shall support collaborative behaviour and address behaviour which is not collaborative’.


effective as they do not focus on specific issues relevant to small works. The

clauses in the RIBA contracts, on the other hand, are targeted to areas where

dispute arise and provide simple solutions to ensure good risk management.

The RIBA Concise Building Contract is simple yet comprehensive, written in plain English;

it is concise and provides all parties with an effective and balanced contractual

arrangement.

Part 3: The RIBA Domestic Building Contract and the RIBA Concise Building Contract

The RIBA Domestic Building Contract and the RIBA Concise Building Contract follow a

similar structure, with broadly similar content. Each contains slightly different features which

reflect their purposes and uses as a domestic or commercial contract.

There is no recommended project value for the contracts, as it is felt that this is not the

main factor affecting contract choice in practice. It is, however, recommended that the

contracts are suitable for projects lasting up to 12 months.

Summary of the Contracts

The Contracts are divided into three parts:

• the Agreement

• the Contract Details

• the Contract Conditions

One or more other documents (called ‘Contract Documents’) may also form part of the

Contract; this includes drawings, specifications, concise description of the works or any

other document that describes in detail the work that the client wants the Contractor to

carry out, including any restrictions that apply. Such Contract Documents would have to be

listed in the Contract Details to form part of the Contract.

The Agreement

This is a short document which records the agreement of the parties to the contract terms

and conditions. There are options to sign as a corporate body where appropriate.


The agreement may be signed as a simple contract or as a deed. This choice determines

the statutory limitation period within which a party can bring claim for breach of contract:

• Simple contract: 6 years

• Deed: 12 years

Contract Details

In this section, the parties describe the project-specific features of the works. It contains:

Main items: general information required for most projects. These include:

• A description of the subject of the Contract (The Works), where it will take place,

and any factors affecting how it is to be carried out

• Details of consultants, the documents on which the Contract is based (The

Contract Documents)

• Items concerning the management of the Works, and facilities to be provided

at the site

• Start and completion dates, and the consequences of failure to meet those

dates

• Contract Price and payment

• Provisions for dealing with defective work, insurance and dispute resolution

Optional items: these are additional provisions that allow for greater control of the Works

and might be required in more complex projects. These include provisions for:

• Submission of a detailed programme by the Contractor

• Contractor design of parts of the Works

• Completion in sections

• Client to influence the choice of subcontractor (‘Required specialist’)

• Collateral warranties/ third party rights agreements

• Variations to the payment procedures including payment on completion (suitable for

works of duration of 45 days or less)

• Milestone payment* and Advanced payment*

• Clauses for use by ‘public sector’ Clients*

• Contractor to request evidence of the Client’s ability to the pay the contract price*

• A ‘new building’ warranty**


• Client to administer the contract without a separate consultant**

* Concise Contract only

** Domestic Contract only

If any of these are selected, the corresponding ‘Optional Clauses’ in the Contract

Conditions will apply.

Contract Conditions

These are the ‘terms and conditions’ of contract, and they set out in detail the rights and

obligations of the parties and the allocation of risks. They are also divided into ‘Main

Clauses’ and ‘Optional Clauses’. The main clauses apply in all cases. The optional clauses

will only apply if the corresponding optional item is selected in the Contract Details.


Part 4: Comparison with other contracts

We have selected four important criteria to compare the RIBA Building Contracts with other

available contracts. These are the criteria Parties consider (or should consider) when

deciding on the contract to choose for a project:

• Scope: the comparison table sets out the type of projects and procurement method

the contracts are intended for, and the range of contract clauses and any other

limitations

• Cost: the table sets out and compares the clauses available under each contract to

ensure that a project is completed to budget

• Quality: the contracts will be compared on how well their provisions help facilitate

the client/ consultant in ensuring that the contractor’s work is of the appropriate

quality

• Time: the table will compare contract clauses to clearly set out the options available

in each contract to enable Parties to complete projects on time


RIBA Domestic Building Contract

Comparison of the RIBA Domestic Building Contract and the JCT Contract for a Home

Owner/ Occupier Contract

RIBA Domestic

Building Contract

JCT Homeowner

Contracts

Description RIBA Domestic

Building Contract

2014

JCT Building Contract

for a Home Owner/

Occupier

Scope

Description of Client Residential

Occupier

(Customer)

Home Owner/ Occupier

Administration by consultant Yes Yes

Option for Client to administer Yes (covered

under one contract)

Yes (this is in a second

variant)

Traditional Procurement Yes Yes

Up-to-date on all consumer regulations,

including the Consumer Contracts

(Information, Cancellation and

Additional Charges) Regulations 2013

Yes Not currently

Simple payment mechanism Yes Yes

Contractor may request payment Yes No

Collaborative Working Yes No

Risk management option Yes No

Contractor Design of parts of the work Yes No

Completion in sections Yes No

Cost

Contract price stated (with VAT if

applicable)

Yes Yes

Limited provision to adjust contract price Yes Yes


Rules to govern assessment of

adjustment

Yes No

Time bar on applications for additional

payment and extensions of time to

ensure efficient management of claims

Yes No

Contractor to make savings suggestions Yes No

Insurance provisions Yes Yes

Checking regime for insurance Yes No

Insurance backed guarantee against

Contractor insolvency

Yes No

Quality

Provision for retention on payments Yes Yes

Quality of materials Fit for purpose New and suitable

Access for consultant for inspection

purposes

On site and off site On site only

Consultant may accept defective work

and adjust price accordingly

Yes No

Work may be opened up for testing Yes No

Client may influence choice of

Subcontractor

Yes No

Clear explanation of practical completion Yes Yes

Time

Start/ Completion Dates clearly identified Yes Yes

Liquidated damages for failure to

complete

Yes No

Facility to request Contractor’s

programme

Yes No

Detailed rules governing application and

calculation of changes to the completion

date

Yes No


Comparison of the RIBA Domestic Building Contract and the Federation of Masters

Builders (FMB) Domestic Contract for Minor Building

RIBA Domestic

Building Contract

FMB Contracts


Building Contract

2014

Federation of Masters

Builders (FMB)

Domestic Contract for

Minor Building

Scope


Occupier

(Customer)

Domestic client

(property owners must

be named)


Option for Client to administer Yes Yes






Yes Not currently

Simple payment mechanism Yes No (requires payment

of percentage of the

contract price into a

joint account)

Contractor may request payment Yes Yes

Collaborative Working Yes No


Contractor Design of parts of the work Yes Yes


Liquidated damages for late completion Yes No

Cost

Contract price stated (with VAT if Yes Yes


applicable)



adjustment

Yes No


payment and extension of time to ensure

efficient management of claims

Yes No

Contractor to make savings suggestions Yes No


Checking regime for insurance Yes No



Yes Yes

Quality


Quality of materials Fit for purpose New and of satisfactory

quality


purposes




Yes No



Subcontractor

Yes No

Clear explanation of practical completion Yes No

Time

Start/ completion dates clearly identified Yes Yes


complete

Yes No


programme

Yes No



date

Yes No


Comparison of the RIBA Domestic Building Contract and the JCT Minor Works Building

Contract

RIBA Domestic

Building Contract

JCT Minor Works

Contracts


Building Contract

2014

JCT Minor Works

Building Contract 2011

Scope


Occupier

Private and local

Authority Employers


Option for Client to administer Yes No






Yes No (it is not a consumer

contract)

Simple payment mechanism Yes No (requires detailed

payment provisions in

accordance with statute

for commercial

contracts)


Collaborative Working Yes (focused on

domestic and small

works)

Yes (widely drafted. It is

also a supplemental

provision and needs to

be added to apply)


Contractor Design of parts of the work Yes (with provision

for professional

indemnity

insurance)

Yes (in a second form –

Minor Works with

Design with no

provision for


professional indemnity

insurance)


Liquidated damages for late completion Yes Yes

Cost

Contract price stated (with VAT if

applicable)

Yes Yes (without VAT)



adjustment

Yes Yes




Yes No

Contractor to make savings suggestions Yes Yes (this is

supplemental provision

and would have to be

incorporated to apply)


Checking regime for insurance Yes Yes



Yes No

Quality


Quality of materials Fit for purpose Reasonable satisfaction

of the Architect/

Contract Administrator.


purposes




Yes No



Subcontractor

Yes No


Time




complete

Yes Yes


programme

Yes No



date

Yes Yes


RIBA Concise Building Contract

Comparison of the RIBA Concise Building Contract and the JCT Minor Works Building

Contract

RIBA Concise

Building Contract

JCT Minor Works

Contracts

Description RIBA Concise

Building Contract

2014

JCT Minor Works

Building Contract 2011

Scope

Description of Client Private and Public

Employer’s

Private and local

Authority Employer’s



Payment mechanism complies with the

Housing Grant, Regeneration and

Construction Act as amended

Yes Yes


Advanced payment provision Yes No

Flexible payment provisions i.e. for

works lasting for 45 days or less, using

milestone payments

Yes No

Collaborative Working Yes (focused on

domestic and small

works)

Yes (widely drafted. It is

also a supplemental

provision and needs to

be added to apply)


Contractor Design of parts of the work Yes (with provision

for professional

indemnity

insurance)

Yes (in a second form –

Minor Works with

Design but with no

provision for


professional indemnity

insurance)


Liquidated damages for late completion Yes Yes

Cost

Contract price stated Yes Yes



adjustment

Yes Yes




Yes No

Contractor to make savings suggestions Yes Yes (this is

supplemental provision

and would have to be

incorporated to apply)


Checking regime for insurance Yes Yes

Quality


Quality of materials Fit for purpose Reasonable satisfaction

of the Architect/

Contract Administrator.


purposes




Yes No

Work may be opened up for testing to

ensure quality

Yes No


Subcontractor

Yes No


Time



Further information

For further information on the RIBA Building Contracts visit www.ribacontracts.com


complete

Yes Yes


programme

Yes No



date

Yes Yes