Managing a dispute - is your contract worth the paper it is written on?

No one wants disputes with their builder, and since most disputes are over what works should be done and how much and when the agreed amount should be paid, the best way forward is to have a clear agreed scope of the works in question and equally clear agreement for payments.

However, with the best laid plans, there will always be the opportunity for either builder or client to take advantage, either by builder not completing works as agreed or by client not wanting to pay for works that were not. Don’t forget that there are clients that sometimes break the rules, it’s not only builders.

So the obvious way is to put a contract in place that will protect the client, right? …. Well maybe!

This year, I have been called in to assist with two significant disputes that in both cases had a contract in place.

Unfortunately, in both cases the contracts were designed to be used when a professional was not involved and in both cases they were the wrong contract.

The first one which is highlighted in a case study on my web site involved works agreed using a FMB (Federation of Master Builders) small works contract, introduced by the builder who claimed to be a member of the FMB, a fact not totally correct since his membership had not been renewed, which left the client in a pickle when works did not complete according to plan.

The second case involved works agreed between client and builder using a JCT Homeowner contract, which again did not involve a professional. This type of contract was totally inappropriate since it is really designed for people conducting relatively small works of say £20 - £30k. The works in question were in the region of £300k but client moved forward with it at the suggestion of the builder.

The point I am making is that contracts are all very well and good if firstly they are the correct one and secondly are administrated by someone who knows what they are talking about, so can advise correctly.

In both of the above cases, the builder had agreed to work under contract to pay lip service to the client who thought that they were legally protected. Payment structure had been agreed which was heavily weighted in the builders favour and was probably the only part that was actually adhered to, on the builders part.

The reality is that at domestic build level, especially with no professional involvement, the contract is little more than a record that an agreement has been made. If either party break the agreement, such as works incomplete but most of the money paid, as in both of the above, the course of action is both very involved and potentially expensive.

There has to be a question over the wisdom of creating a contract unless there is a professional involved to both advise and administrate the proceedings, therefore keeping it on track so that neither party is exposed.

Having said that, there are no doubt many instances where a contract was in place in circumstances such as the above but with no drama. However I will wager that in almost all of such circumstances, there was no reason for the contract to be questioned as both parties had played by the rules fair and square.

Vince Holden MCIOB

vince@vinceholden.com

+44 (0) 7815 144959